E-rate Update - SLC Releases Commonly Asked Questions III
Message Posted March 4, 1998
SLC Releases Third Set of Clients' Commonly Asked Questions Today the Schools and Libraries Corporation released their third set of clients' commonly asked questions. Among the issues that the SLC clarified in this document are: lease purchase arrangements, prepayments of eligible services, the difference between site specific and shared services, IU discount calculations, and eligibility of wireless services. As we stated in a previous message, this is the first in a series of documents that is due to be released by the SLC.
-- Julie
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Eligible Services-Lease Purchase
Q. 1) How will the eligibility of services acquired pursuant to a lease purchase arrangement be determined?
A. SLC defines a "lease purchase" as any arrangement pursuant to which eligible services or equipment are leased to a school or library in order to provide eligible services, and at the conclusion of a specific period of time, title to the facilities or services is assigned to the school or library. These transactions will be considered purchases of equipment. Reimbursement from the Schools and Libraries Universal Service Program will be authorized in accordance with and no sooner than the schedule for payments to be remitted by the eligible school or library to the service provider according to the underlying lease purchase contract. The duration of the lease purchase contract must be a commercially reasonable term, based on the time that the equipment or facility is expected to provide useful service to the school or library. For wide area network services which may be eligible for discounts only if leased, SLC will not provide discounts on a lease purchase contract. The term "lease" is used to refer to contractual arrangements whereby the ownership of the facility remains with the service provider. No ownership attributes will be undertaken by the lessee. The lessee is essentially the "renter" of the service or facility. In conventional telecommunications terms, the lessee is the "ratepayer" of services. Whether or not a contractual arrangement constitutes a lease will be based on a review of commercially reasonable terms and conditions. SLC will not fund discounts on a contract that is titled or described as a lease when in effect the terms of the agreement constitute a purchase.
For qualified preexisting contracts, the purchase of eligible services and/or facilities and the payment for such services or facilities must both occur on or after January 1, 1998 in order to be eligible for discounts. SLC will not authorize the disbursement of discounts on facilities or services originally acquired or purchased prior to January 1, 1998. For example, if an eligible school or library originally purchased internal connections prior to January 1, 1998, and later refinanced the purchase sometime after January 1, 1998, the date of service delivery will be the original purchase or acquisition date, which in this example, is prior to January 1, 1998. Consequently, discounts on the internal connections originally purchased prior to January 1, 1998 will not be funded by the Schools and Libraries Universal Service Program.
For services and facilities which commenced delivery prior to January 1, 1998 and the completion of the installation of such services or facilities did not occur until after January 1, 1998, discounts may be available for the eligible services and facilities delivered after January 1, 1998. A proration of the contract costs will be necessary to appropriately identify only the relevant costs incurred for services delivered on or after January 1, 1998.
Eligible Services-Prepayments
Q. 2) Can discounts be obtained on prepaid eligible services?
A. The payment for and delivery of eligible services must occur on or after January 1, 1998 in order to qualify for discounts. Discounts on prepayments may be obtained for services provided during the current program funding year only. Prepayments for services to be provided in subsequent funding years will not be discounted during the current program funding year. For services procured on a periodic payment basis, reimbursement from the Schools and Libraries Universal Service Program will be authorized in accordance with and no sooner than the schedule for payments to be remitted by the eligible school or library to the service provider according to the underlying contract. The original purchase date or service delivery date will govern for purposes of determining whether the service was provided on or after January 1, 1998. Please refer to the question and answer above on the treatment of lease purchase contracts.
Eligible Services-Shared and Site Specific
Q. 3) What is the difference between site specific and shared services?
A. Site specific services are used only by an individual building in a school district, library system or other consortia. There are two categories of site specific services. First, the actual connecting of classrooms by the installation of wireline or wireless devices within an individual school, or the actual connecting of rooms within a non-administrative library building is a site specific service because only that individual school or library building will use those installed facilities and services. Second, a dedicated private line between an individual school or library building and a party providing non-telecommunications services such as an Internet service provider is site specific because no other individual school or library building will participate in or share that service.
Any service that is not clearly site specific may be treated as shared. Shared services are services that are delivered to an individual school orlibrary as part of a network of services in which other buildings participate in the use of such services. The particular connection to that network does not alter the shared nature of the services. For example, one school may receive a higher bandwidth connection to the network of shared services than other schools in a district so long as the district ensures that all schools receive an appropriate share of the services. As noted in the FCC's 4th Order on Reconsideration, consortia applicants must certify that each individual institution will receive a proportionate share of the shared services within each year in which the school or library is used to calculate the aggregate discount rate. As further referenced by the FCC, this requirement is set forth in the Form 471, which requires applicants to certify that they are aware that the level of discounts for shared services in future years is conditional upon providing an appropriate share of such services to the most disadvantaged schools and libraries. [Para. 206 of the FCC 4th Order on Reconsideration, CC Docket No. 96-45, footnote 631].
Eligible Schools and Libraries
Q. 4) A city has an ongoing program of school construction and renovation projects. Each project is a separate procurement, and the City selects the general contractor. The general contractor selects its own subcontractors. Internal connections are installed by one or more subcontractors as a small part of each project. How does the City apply for discounts to the Schools and Libraries Universal Service Program?
A. The City may competitively bid and then award contracts to the general contractor for eligible services so long as the City complies with the FCC rules on competitive bidding for eligible services as well as state and local procurement requirements. The City may file one Form 470 that covers all such procurements and contracts. Form 471 may be filed by the city, school district, or individual schools depending upon which entity will be responsible for remitting the payment to the service provider. In this case, the service provider is the general contractor. The general contractors-service providers must submit invoices to the SLC for reimbursement of the discounted portion of the eligible services.
Eligible Entities-Instructional Buildings
Q. 5) In a school building with instructional classrooms, there is also an auditorium and lounge area that are sometimes used as classrooms. Are the auditorium and lounge areas eligible for discounts?
A. Yes. The costs incurred for providing eligible services to school buildings that house classrooms will be eligible for discounts. Please refer to question 11 below relating to services provided to non-instructional buildings or locations and the SLC Policy Statement regarding the definition of educational purposes, as cited in question 11.
Eligible Entities-Bookmobiles
Q. 6) Are bookmobiles eligible to receive discounts?
A. Yes, if these facilities are administered by eligible schools and libraries and either house places of instruction (if administered by a school) or are publicly accessible to library patrons (if administered by a library). The services delivered to the bookmobile would be eligible for discounts, but not the cost of buying, constructing or maintaining the bookmobile itself.
Q. 7) How should a bookmobile which qualifies as an eligible school or library be counted for purposes of Block 2 of Form 470 and Block 3 of Form 471?
A. A bookmobile should be treated as a classroom of a school, or a room of a non-administrative library building.
Contracts
Q. 8) If an eligible school or library is purchasing services from a master contract signed on or before July 10, 1997, does a purchase after that date qualify as an existing contract even though the services may not be provided until after January 1, 1998?
A. Yes.
Q. 9) Will a separate contract document be required on the part of a billed entity to memorialize a purchase from a master contract?
A. Yes, either a signed written contract or a signed purchase agreement must be executed.
Q. 10) Must a written contract be signed for Internet service if the service usually is provided on a month to month basis?
A. Yes, unless the Internet service is offered as a tariffed service. If offered as a tariffed service, then purchases may proceed on a month to month basis without the necessity of executing a signed, written contract. Please note, however, that each year a competitive bid of the Internet services purchased monthly from a tariff will be required pursuant to a form 470 application as a prerequisite for filing a form 471 application.
Discounts
Q. 11) How should an educational service agency or intermediate unit compute the discount for the services that it procures for its own use?
A. The educational service agency or intermediate unit should compute the school lunch eligibility percentage for which it provides classroom instruction. If the ESA provides classroom instruction offsite outside of it's own facility, and otherwise meets the definition of an eligible school, the ESA may compute its discount based on the discounts of the school districts that it actually serves. In order for an educational service agency or intermediate unit to qualify for discounts, it must meet the definition of school under 20 U.S.C. Section 8810(14) or (25). SLC further has clarified that the eligible services must be provided for educational purposes described as follows:
"The primary purpose of the services for which support is sought must be the delivery of services into the classrooms or other places of instruction at schools and libraries that meet the statutory definition of an eligible institution. Support for the administrative functions of library or educational programs is permitted so long as the services are part of the network of shared services for learning. Universal service support will be limited to services delivered to the onsite educational facility or facilities. Services at a personal residence or at locations which do not host places of instruction or are not accessible to library patrons, with the exception of a centralized district office or similar facility, are not eligible for support."
The FCC's Fourth Order on Reconsideration clarifies that discounts may not be available for internal connections in non-instructional buildings used by a school district unless those internal connections are essential for the effective transport of information within instructional buildings. Discounts for internal connections may not be available for library administrative buildings unless those internal connections are essential for the effective transport of information to a non-administrative building of a library. [47 C.F.R. Section 54.506].
Discounts-Urban or Rural Classification
Q. 12) What is the procedure for reviewing urban and rural classifications?
A. Counties are first classified as either urban or rural depending on the Metropolitan Statistical Area (MSA) in which they are located. To determine whether a school or library is located in an urban or rural county, the school or library may access the MSA Table via Internet or via the Client Service Bureau at 1-888-203-8100. If the county is not listed in the MSA table, the county is classified as rural. If the county is listed in the MSA table, then the county is classified as urban, except if part of the county, as identified by census tract, is listed in the Goldsmith Modification column of the MSA table. If the census tract is identified under the Goldsmith Modification, then entities located in those census tracts are classified as rural. To determine whether a school or library's street address is located within one of the listed census tracts, you may contact the FFIEC (Federal Financial Institutions Examination Council) website at www.ffiec.gov, or the U.S. Census Bureau within your state for help in determining rural status. The regional center telephone numbers for the U.S. Census Bureau are identified in the MSA Tables.
If you contact the FFIEC website, first select Information Services. Next, select FFIEC Geocoding System. Third, input the school or library's street address and zip code. The BNA/Tract number for the location will be provided. Compare this number to your county's Goldsmith Modification number to determine whether a tract number is listed which designates your location as rural.
Consortium Discounts
Q. 13) If an eligible school or library that participates in a state contract procures telecommunications services on behalf of other eligible schools or libraries, may the school or library obtain a discount from the Schools and Libraries Universal Service Program, allocate the costs of service amongst other eligible schools or libraries and apply for discounts on behalf of all of the eligible schools and libraries?
A. Yes, under certain conditions. If the school or library that is procuring the services is itself eligible for discounts, it may qualify for discounts in its own right, and the lead consortium member may file an application for discount funding on its own behalf as well as on behalf of other members of the consortium. If the school or library that has contracted for the telecommunications services to be provided to eligible schools or libraries is not itself an eligible entity, then the school or library cannot claim discounts for itself. In that situation, the contracting school or library would allocate the discounts only among the eligible entities taking service under the state contract. See SLC Fact Sheets on Billed Entities and Discount Calculations for more details.
Eligible Service Providers-Wireless
Q. 14) Are wireless services eligible for discounts?
A. Yes, wireless services are eligible for discounts, provided that the services are Internet access, internal connections or telecommunications services and the use of the services is in accordance with the program rules (eligible uses by eligible entities). Also, users of wireless or any other technology must adhere to the FCC's rules on wide area networks. One of the bedrock principles underlying the FCC's Report and Order on Universal Service is competitive neutrality. [FCC Report and Order of May 8, 1997, para. 144]. Also, as stated in the FCC's Frequently Asked Questions dated July 2, 1997, CC Docket No. 96-45, the definition of eligible telecommunications services does include wireless telecommunications services. (FAQ No. 6). The FCC's Report and Order also makes clear that schools and libraries may procure Internet access and internal connections from any type of service provider, including wireless providers, and qualify for discounts. [FCC Report and Order of May 8, 1997, CC Docket No. 96-45, para. 591-600].
Eligible Service Providers-Lowest Corresponding Price
Q. 15) Which service providers are subject to the lowest corresponding price requirement?
A. All service providers providing a bid in response to a request for services pursuant to the Schools and Libraries Discount Program are obliged to bid the "lowest corresponding price," which is the price charged to similarly situated non-residential customers for similarly situated services. Similar services include those provided under contract as well as those provided under a tariff.
Eligible Service Providers-Bidding Procedures
Q. 16) What recourse may be available to a service provider that believes that its bid to provide services was the most cost effective bid, but the bid was not accepted in response to a posting of a request for services pursuant to a Form 470 Application?
A. Recourse is through state and local procurement procedures. SLC will cooperate with any such process, and requests that it be notified of any such procedure which may be initiated, by contacting the Client Service Bureau at 1-888-203-8100. SLC will undertake field audits of applicants to assure compliance with the FCC's rules governing this program. If there is reason to believe that a FCC rule has been violated, a party may seek recourse with the FCC, and SLC will cooperate with the FCC to resolve any such proceeding which may be initiated.
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