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On May 7, 1997, the Federal Communications Commission (FCC) adopted a Universal Service Order implementing the Telecommunications Act of 1996. The Order ensures that all eligible schools and libraries have affordable access to modern telecommunications and information services. Up to $2.25 billion annually is available to provide eligible schools and libraries with discounts, often referred to as the "E-rate," for authorized services, beginning January 1, 1998.
Overview
Level of Discounts
Discounts range from 20 percent to 90 percent, depending on economic need and location (urban or rural). The level of discount is based upon the percentage of students eligible for participation in the federal free and reduced price school lunch program. Libraries will use the school lunch eligibility percentage and urban/rural status for their local school district.
Services Eligible for Discount
Discounts can be applied to all commercially available telecommunications services, Internet access, and internal connections. Discounts are available in all states, as long as the state adopts intrastate discount levels at least equal to the federal discounts.
Application Process
Discounts will be applied as of January 1, 1998, for qualified pre-existing contracts. For contracts covering new services with approved discounts, the discounts will be applied as of the date the contract is signed. A technology plan must be developed, and approved by an independent agency, such as a state education or library agency, or the Schools and Libraries Corporation (SLC). Eligible institutions must submit a self-certification of eligibility (attesting that all criteria have been met) to the SLC along with a description of the services requested.
The percentage discount mechanism for administering this program means that this program is not a grant program. Schools and libraries are required to pay only the "non-discounted" portion of their costs for telecommunications services, Internet access and internal connections. The discounted portions of the services are directly applied to reduce the bills to be paid by schools and libraries and these amounts will be reimbursed directly to the service providers from the fund administrator. Requiring schools and libraries to pay a share of the costs from their own funds is intended to insure cost-effective purchases.
Fund Administration
SLC, a newly formed independent not-for-profit entity established by FCC rules, has responsibility for administering the schools and libraries program. The Universal Service Administrative Company (USAC), a subsidiary of the National Exchange Carrier Association (NECA), has been named by the FCC as the interim, overall administrator of Universal Service Fund collection and distribution.
Disbursement of Funds
Once an application has been accepted and approved, the schools and libraries will apply the applicable discount to their telecommunications services, Internet access and internal connections, and pay the remaining portion of the costs to the service providers. The service providers will seek reimbursement from the SLC for the cost of the discounts.
Schools and Libraries Eligibility
Schools must meet the statutory definition of an elementary or secondary school found in the Elementary and Secondary School Act of 1995 (20 U.S.C. Section 8801 (14) and 8801 (25)). They must not be operating a for-profit business, and may not have an endowment exceeding $50 million.
Examples of Eligible Schools
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Examples of Ineligible Schools
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Libraries or library consortia eligible for assistance from a state library administrative agency under the Library Service and Technology Act and not operating a for-profit business are eligible for discounted services.
Examples of Eligible Libraries
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Examples of Ineligible Libraries
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Consortia
A school or library can apply for a discount on a specific service either as an individual entity or as part of a consortium.
Entities within a community (e.g., schools, school districts, libraries, library systems, government, and health care providers) could identify their common communication needs and plan for a community infrastructure. A consortium could negotiate with service providers from a position of strength due to the aggregated demand.
Consortia may include both eligible and ineligible entities. Ineligible entities are those members of a consortium that are not entitled to a discount. Entities not eligible for universal service discounts, however, may benefit from lower pre-discount prices from such aggregation. Mixing eligibility will place significant record-keeping responsibility on consortia. They will be required to demonstrate that only eligible entities receive the discounts.
Consortia are not required but are encouraged. Consortia advantages are:
Calculating the Discount
Discounts for eligible schools and libraries are set as a percentage discount from the pre-discount price. Pre-Discount price means the price the service provider agrees to accept as total payment for its telecommunications or information services. This price is the sum of the amount the service provider expects to receive as payment from the eligible school or library and the amount it expects to receive as reimbursement from the universal service support mechanisms for the discounts provided.
Schools
The discount is based on the number of students eligible for participation in the national school lunch program and the school's classification as rural or urban. The national school lunch program is a program administered by the U.S. Department of Agriculture and state agencies that provides free or reduced price lunches to economically disadvantaged children.
For shared services, school districts applying for discounts on behalf of their individual schools may calculate the district-wide average percentage of eligible students. For example, a school district would calculate the appropriate discount rate for each individual school, then multiply each school's discount rate by the number of students in the school. Add up the total for all schools and divide by the total number of students in all schools that are receiving an appropriate share of shared services. Last, round the result to the nearest percentage point. For site-specific services, an individual school would use its own discount level.
Libraries
The discount for libraries is based on the percentage of student enrollment that is eligible for the national school lunch program in the public school district in which the library is located.
Library systems may apply for discounted services on behalf of individual branches of the library system by calculating a system-wide percentage which would be computed by first calculating each individual library's discount, then summing the discounts and dividing by the number of library branches. The library will use the school lunch eligibility discount percentage for the school district in which the library is located. If a library system is located in more than one school district, then the library will use the average of the discount percentages for each school district in which the library system has a branch. Alternatively, an individual branch of the library system could apply using its own discount level.
The level of discount will be based on a school's or library's percentage of students eligible for the national school lunch program and its location in an urban or rural area.
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DISCOUNT MATRIX HOW DISADVANTAGED? | DISCOUNT LEVEL | ||
| % of students eligible for national school lunch program | (estimated % of US schools in category) | Urban Discount Percentage | Rural Discount Percentage |
| < 1 | 3 | 20 | 25 |
| 1-19 | 31 | 40 | 50 |
| 20-34 | 19 | 50 | 60 |
| 35-49 | 15 | 60 | 70 |
| 50-74 | 16 | 80 | 80 |
| 75-100 | 16 | 90 | 90 |
[Universal Service Program - continued]