A r c h i v e d  I n f o r m a t i o n

Report to the Federal Communications Commission (FCC)
by
The E-Rate ¹ Implementation Working Group (Working Group)
composed of
U.S. Department of Education
Institute of Museum and Library Services
National Telecommunications and Information Administration
Rural Utilities Service
Education and Library Networks Coalition

July 31, 1997

I. Introduction and Recommendations

This report is intended to respond to the request from the FCC ² for recommendations on (1) the design of application forms to be submitted by schools and libraries for Universal Service Fund (USF) support and (2) alternative measures (from review by the State education or library agency) for the required approval of technology plans as part of the E-rate application process. In responding to this request for specific recommendations, it has been necessary for the Working Group to flesh out certain details of the application process provided by the FCC.

The Working Group met continually throughout the months of June and July, both as a full group and in subgroups assigned to specific matters. Individual members of the Working Group invited others from the education and library communities with special expertise to join meetings. We have also spoken extensively to the parties in the field who will actually operate the E-rate system: educators and education administrators, librarians and library administrators, State public utility commissioners and staff, service providers, the interim Fund Administrator and information-technology experts. The Working Group also held a briefing session for all interested parties. The practical input of those outside the Working Group has been very valuable.

Although various members of the Working Group had previously made recommendations different from the decisions made by the FCC in the E-Rate Ruling, we all agreed for purposes of this task to work within those decisions whenever possible. As in any joint effort, every member of the Working Group does not necessarily agree completely with every one of the report's specific recommendations. There is, however, consensus on the report as a whole as our best recommendation for the implementation of the E-rate, and we all join in supporting it on that basis.

In this report we first summarize the application process as set forth in the E-Rate Ruling and describe some of the complexities posed by the varied, decentralized processes by which schools and libraries inventory their existing technology resources, plan for their use and for further technology acquisitions and procure the additional resources. We then provide the recommendations arising from the FCC's requests in the context of these complexities. The proposed application forms are contained in Appendix C. The Working Group's other specific recommendations are: ³

II-1. A standard of materiality or substantiality should be promulgated to obviate any need to re-post minor modifications to contracts.

IV-1. The Schools and Libraries Corporation (SLC) ⁴ should explore the development of standardized data formats for the inventory/assessments and other information submitted in the application process.

V-1. SLC should explore the establishment of a data warehouse, or relational data base, to capture that information where it already resides, integrate it into applications and make it available for analysis.

VI-1. Service providers have confirmed that Requests for Proposals (RFPs) and other detailed descriptions of services requested would not be very useful to them in culling out promising prospects for more detailed analysis. Until these documents can be more effectively digitized, they should be made available on request by the applicant rather than posted on the website. Applications should, however, contain a short, summary description of the applicant's objectives in procuring the services and a standardized checklist specifying those services, both of which would be posted.

VI-2. The requirement for inventory/assessments should not be implemented until after this interim phase.

VI-3. At least during the interim phase, applicants should not send technology plans to SLC. Instead, applicants should certify compliance with the planning requirement, identify the plans and the required approvals in their work papers, and provide them to SLC upon request.

VI-4. At least during the interim phase, applicants should not send executed contracts to SLC. Instead, applicants should retain executed contracts in their working papers and provide them to SLC upon request.

VII-1. The calculation of discount rates for applicants representing multiple schools and/or libraries should be governed by the same principles, whether the applicants are legal governance entities, such as school districts, library systems or States, or consortia formed for particular procurements.

VII-2. In an application for multiple service acquirers in which they are to be billed directly by the service provider for the services that they individually receive, the appropriate individual discount rate should be applied to each separate bill.

VII-3. In an application for multiple service acquirers with central billing, the individual discount rates for those users should be averaged on a weighted basis, using projected allocations of directly allocable services and projected distributions of common or shared services that cannot be directly allocated as the weighting factors. In calculating discount rates in the first instance, applicants should allocate to each school and/or library those services that can be so allocated, using detailed breakdowns that should be furnished by the service providers. In distributing common or shared services, which are incapable of such direct allocation and breakdowns, the applicant should be able to use reasonable proxies, such as numbers of computers or, when it is the only significant factor affecting distribution of services, population (either by a population-weighted average or by an area-wide calculation). To accommodate the legacy billing systems of at least some service providers, the applicant should round the resulting aggregate discount rate to the nearest five percent. The applicant should maintain work papers to support its discount rate calculations. The work papers should be publicly available, reviewable at any time by SLC and in fact be reviewed immediately by SLC if the rate exceeds parameters in a filtering program that SLC should develop. The FCC should develop principles to determine the appropriate consequences when the actual distributions of services, as indicated by detailed bills from service providers, differ from the projections used in calculating the aggregate discount rates.

VII-4. In all applications involving multiple service acquirers, the applicants should strive to ensure that each eligible school and library receives the discount to which it is entitled. In all cases, the applicant should calculate the discount rate(s) in the first instance, although SLC should retain ultimate responsibility for validity of the rate(s). The service provider should not be responsible for the allocation of non-allocable shared or common services under central billing, but it should be required to provide detailed breakdowns of allocable nonshared costs by individual school and library whenever possible.

VII-5. SLC should create a list of individual discount rates for every school and library for which the necessary data is publicly available and post that list on the website.

VII-6. Since service providers state that they do not need discount rates to formulate bids, and projections based on specific services should be more reliable than those at the initial application stage, discount rates should be calculated in funding requests rather than in initial applications.

VIII-1. If the State education or library agency chooses to delegate its authority to review technology plans, it should notify SLC.

VIII-2. As an alternative review mechanism for technology plans, SLC should create a peer-review process, using intermediate independent organizations to administer the process when they are available.

VIII-3. A common minimum general standard should be promulgated by the FCC for the approval of all technology plans after the interim period. The standard should be used immediately for all new technology plans.

VIII-4. A separate technology plan should not be required for USF support. An existing technology plan, including one pre-approved for the E-rate, should satisfy the E-rate requirement as long as it has been approved in accordance with the above standard.

VIII-5. Technology plans should be re-approved at least every five years. Although, subject to the granting of annual funding requests, applicants should be entitled to USF support for longer multiyear contracts, the applicable technology plan should be required to justify the extended duration of the contract, either with respect to continued use of the services or as a payment option.

¹ The term E-rate, or Education Rate, has become common usage for the maximum-price limitation and discount rates established by the FCC in Section X of its report and order released on May 8, 1997, in Rural-State Joint Board on Universal Service, CC Docket No. 96-45 (E-Rate Ruling).
² See paragraphs 571 and 574 of the E-Rate Ruling. Unless otherwise indicated, further citations are to paragraphs of this ruling or to sections of the regulations under Title 47 of the Code of Federal Regulations, as amended in Appendix I of the E-Rate Ruling.
³ The recommendations are listed in their order in the report and are numbered by the sections in which they appear.
In the E-Rate Ruling the FCC assigned responsibility for the application process to the Fund Administrator. In its report and order in Changes to the Board of Directors of the National Exchange Carrier Association, Inc., CC Docket No. 97-21 and its second order on reconsideration in this matter, jointly released on July 18, 1997 (July 18 Ruling), the FCC reassigned this responsibility to SLC, a new unaffiliated entity to be established by the interim Fund Administrator.
⁴ Paragraph 67 of the July 18 Ruling authorizes SLC to review and certify technology plans when a State agency indicates that it will be unable to do so within a reasonable time.

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