Beginning next year, schools and libraries will be able to apply for eRate discounts on internal connections–the wiring, routers, switches, and network file servers necessary to bring internet access into classrooms–only twice within a five-year period, the Federal Communications Commission (FCC) has decided.

The agency, which adopted the new policy at its Dec. 17 meeting, made an exception for network maintenance. That is, schools and libraries will be able to apply for discounts each year on the costs associated with maintaining their existing networks–but starting in Funding Year 2005, they will be limited in the number of times they can apply for discounts on new equipment.

The FCC also ratified procedures for rolling over approximately $420 million in unused funds from the 1999, 2000, and 2001 program years. These funds will be dispersed in Funding Year 2003 to increase the overall amount of funding available. In subsequent years, any unused funds will be rolled into the next program year.

The new policies are part of the “Third Report and Order and Second Further Notice of Proposed Rulemaking,” a document that amends a number of rules concerning administration of the $2.25 billion-a-year eRate, which provides discounts on telephone and internet services for schools and libraries. The changes aim to make the program fairer for participants while also discouraging waste, fraud, and abuse.

Limiting the number of times schools can apply for discounts on internal connections “will provide applicants with a greater incentive to fully utilize internal connections purchased with universal service support,” explained Karen Franklin, attorney advisor for the Telecommunications Access Policy Division of the FCC’s Wireline Competition Bureau, who presented the “Third Report and Order” at the meeting.

It also should allow for a greater number of schools to receive funding for internal connections. Schools in the lower discount brackets repeatedly miss out on this funding because the demand for eRate funding is so high each year.

In addition to these rule changes, the FCC imposed a three-year limit on the transferability of equipment purchased with the help of the eRate. Unless a school or library building temporarily or permanently closes, the equipment must stay put for at least three years.

“This will further strengthen our oversight of the use of internal connections discounts as they relate to equipment purchased,” Franklin said.

Furthermore, the Schools and Libraries Division (SLD) of the Universal Service Administrative Co., which administers the eRate, now will have a specific due date to submit its updated eligible services list to the FCC each year, so the FCC can solicit public comments about the list prior to its final adoption. This policy also will start in Funding Year 2005.

Lastly, the “Third Report and Order” includes a new “Notice of Proposed Rulemaking” to solicit comments on other potential changes to the program, including changing the current discount matrix used to determine an applicant’s discount level, imposing a limit on the total funding an applicant can request each year, as well as modifying competitive-bidding procedures and the definitions of rural applicants, internet access, and leased wide-area networks.

The “Third Report and Order” is based on suggestions and feedback gathered from a public forum held last May, the FCC Inspector General’s semi-annual report, and recommendations from the SLD’s eRate Task Force on Waste, Fraud, and Abuse.

Although all of the commissioners expressed support for the eRate and these changes, a few commissioners called attention to other outstanding problems–including the recent decision to discontinue dark fiber as an eligible service.

“We don’t solve all problems today, however. An abrupt change in the eligible services list has left applications from rural schools and libraries in North Dakota and elsewhere high and dry,” said Commissioner Michael J. Copps. “I see nothing in [the program rules] that compels the exclusion of dark fiber facilities from eRate program support. I hope we can correct this mistake as soon as possible.”

“I also share the concern about dark fiber,” Commissioner Jonathon S. Adelstein said. “I’m pleased that we are reviewing this in the further notice. I’m hopeful that we can resolve this problem.”

The “Third Report and Order” came one week after the FCC’s Office of Inspector General (OIG) publicly released its semi-annual report, which highlights the agency’s continued concerns and progress at reducing eRate waste, fraud, and abuse.

The OIG said it is working in partnership with the U.S. Department of Education, the Federal Bureau of Investigation, and the U.S. Department of Justice to complete its investigations into several alleged cases of fraud and abuse. The OIG, which has never been funded to oversee the eRate, noted that is expecting to receive $3 million from Congress to help complete its work.

See these related links:

Federal Communications Commission
http://www.fcc.gov

“FCC Office of the Inspector General Semi-Annual Report to Congress”
http://www.fcc.gov/oig/SAR93003.pdf