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Synopsis of E-rate NPRM, Pt. III: Equipment Disposal

The NPRM seeks comments on the process for disposal of obsolete E-rate funded equipment. The rules have generally been unclear and the Commission seeks to correct this by promulgating more specific guidance on the topic.

Disposal of Obsolete Equipment
Currently the program guidance prohibits applicants from reselling or transferring obsolete E-rate funded equipment for money or anything of value. Furthermore, the current program rules do not allow applicants to transfer equipment to other eligible entities within three years of purchase even if the applicant is not receiving any money or anything of value for the equipment. Equipment can only be transferred to another eligible entity if the purchasing entity closes either temporarily or permanently. Applicants must notify USAC if that occurs.

What the current guidance is missing is what applicants should do with obsolete equipment that was purchased with E-rate dollars. The NPRM seeks to clarify this program rule gap. The Commission proposes to amend the current guidance as well as revise an FCC form to report such disposals to USAC.

The Commission seeks comments on permitting the disposal of obsolete E-rate equipment for payment or other consideration subject to four basic conditions. If an applicant chooses to dispose of the equipment without receiving any consideration, then the four conditions that must be met will not be applicable. The FCC contends that the rule prohibiting the sale and transfer of equipment was meant to deter applicants from profiting from E-rate purchased equipment during the time in which it was supposed to be in use. However, the Commission concludes that the rule was not meant to extend to applicants who can no longer utilize the equipment due to end-of-life issues.

The NPRM proposes four basic conditions in which equipment can be disposed of:

  1. The equipment has exhausted its useful life but no sooner than five years after the equipment is installed;
  2. The equipment is formally declared to be surplus by the school board, information technology officer, or other authorized body or individual;
  3. The school or library notifies USAC within 90 days of disposal and keeps a record of the disposal for a period of five years following the disposal; and
  4. The disposal process fully complies with state and local laws, where applicable.

Sell or Trade of Equipment
The Commission contends that applicants should be able to sell or trade in end-of-life equipment no sooner than five years from the date the equipment is installed. The Commission recognizes that there are needless and unnecessary costs to applicants to store this obsolete equipment. Furthermore, many applicants just throw away the equipment when it could be used by others. The FCC seeks comments on permitting the disposal of equipment as well as whether a period of five years in which to do so is reasonable.

The FCC also seeks comments on whether to require applicants to make a formal declaration as to when equipment is considered surplus. The Commission contends that requiring applicants to make a formal declaration that the equipment is considered surplus would diminish the premature disposal of such equipment. The Commission does not set forth any specific information as to who would make the declaration as to the equipment being surplus.

The Commission also recommends that an applicant notify USAC within 90 days of the resale or trade in of equipment as well as keep records of the disposal for a period of five years. The manner in which the FCC proposes this should be done is via FCC Form 500, which would be revised to accommodate the new requirements. The NPRM contends that adding this additional record keeping function would further prevent any waste, fraud or abuse as well as provide useful information to USAC regarding the typical usage period of E-rate equipment.

The NPRM also seeks comments on whether or not to require applicants to return any funds related to the resale or trade of the E-rate purchased equipment. The Commission notes that any monies received by an applicant for obsolete equipment would be so minimal that it may actually cause an administrative burden for the program.

A sampling of the proposed E-rate rules seeking comment can be found here.

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