Modernizing the E-Rate Program for Schools and Libraries

FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 54

[WC Docket No. 13-184; FCC 13-100]

Modernizing the E-Rate Program for Schools and Libraries

AGENCY:

Federal Communications Commission.

ACTION:

Proposed rule.

SUMMARY:

In this document, the Federal Communications Commission (Commission) initiates a thorough review and update of the E-rate program (more formally known as the schools and libraries universal service support mechanism), building on reforms adopted in 2010 as well as the Commission's reforms of each of the other universal service programs. The Commission takes this step because there is a growing chorus of calls to build on the success of the E-rate program by modernizing the program and adopting clear forward-looking goals aimed at efficiently and effectively ensuring high-capacity connections to schools and libraries nationwide.

DATES:

Comments are due on or before September 16, 2013, and reply comments are due on or before October 16, 2013. If you anticipate that you will be submitting comments, but find it difficult to do so within the period of time allowed by this notice, you should advise the contact listed below as soon as possible.

ADDRESSES:

You may submit comments, identified by WC Docket No. 13-184, by any of the following methods:

•

Federal eRulemaking Portal: http://www.regulations.gov

. Follow the instructions for submitting comments.

•

Federal Communications Commission's Web site: http://fjallfoss.fcc.gov/ecfs2/

. Follow the instructions for submitting comments.

•

People with Disabilities:

Contact the FCC to request reasonable accommodations (accessible format documents, sign language interpreters, CART, etc.) by email:

FCC504@fcc.gov

or phone: (202) 418-0530 or TTY: (202) 418-0432.

For detailed instructions for submitting comments and additional information on the rulemaking process, see the

SUPPLEMENTARY INFORMATION

section of this document.

FOR FURTHER INFORMATION CONTACT:

Regina Brown, Wireline Competition Bureau, (202) 418-0792, or James Bachtell, Wireline Competition Bureau, (202) 418-2694, or TTY: (202) 418-0484.

SUPPLEMENTARY INFORMATION:

This is a synopsis of the Commission's Further Notice of Proposed Rulemaking (NPRM) in WC Docket No. 13-184, FCC 13-100, adopted July 19, 2013, and released July 23, 2013. The complete text of this document is available for inspection and copying during normal business hours in the FCC Reference Information Center, Portals II, 445 12th Street, SW., Room CY-A257, Washington, DC 20554. The document may also be purchased from the Commission's duplicating contractor, Best Copy and Printing, Inc. (BCPI), 445 12th Street, SW., Room CY-B402, Washington, DC 20554, telephone (800) 378-3160 or (202) 863-2893, facsimile (202) 863-2898, or via the Internet at

http://www.bcpiweb.com

. It is also available on the Commission's Web site at

http://www.fcc.gov

.

We invite comment on the issues and questions set forth in the NPRM and IRFA contained herein. Pursuant to §§ 1.415 and 1.419 of the Commission's rules, 47 CFR 1.415, 1.419, interested parties may file comments on this NPRM by September 16, 2013 and may file reply comments by October 16, 2013.

All filings related to this NPRM shall refer to WC Docket No. 13-184.

Comments may be filed using the Commission's Electronic Comment Filing System (ECFS) or by filing paper copies.

See Electronic Filing of Documents in Rulemaking Proceedings,

63 FR 24121, May 1, 1998.

•

Electronic Filers:

Comments may be filed electronically using the Internet by accessing the ECFS:

http://fjallfoss.fcc.gov/ecfs2/

.

•

Paper Filers:

Parties who choose to file by paper must file an original and one copy of each filing.

• Filings can be sent by hand or messenger delivery, by commercial overnight courier, or by first-class or overnight U.S. Postal Service mail. All filings must be addressed to the Commission's Secretary, Office of the Secretary, Federal Communications Commission.

• All hand-delivered or messenger-delivered paper filings for the Commission's Secretary must be delivered to FCC Headquarters at 445 12th St. SW., Room TW-A325, Washington, DC 20554. The filing hours are 8:00 a.m. to 7:00 p.m. All hand deliveries must be held together with rubber bands or fasteners. Any envelopes and boxes must be disposed of

before

entering the building.

• Commercial overnight mail (other than U.S. Postal Service Express Mail and Priority Mail) must be sent to 9300 East Hampton Drive, Capitol Heights, MD 20743.

• U.S. Postal Service first-class, Express, and Priority mail must be addressed to 445 12th Street SW., Washington DC 20554.

People with Disabilities.

To request materials in accessible formats for people with disabilities (braille, large print, electronic files, audio format), send an email to

fcc504@fcc.gov

or call the Consumer & Governmental Affairs Bureau at (202) 418-0530 (voice), (202) 418-0432 (tty).

In addition, one copy of each paper filing must be sent to each of the following: (1) the Commission's duplicating contractor, Best Copy and Printing, Inc., 445 12th Street SW., Room CY-B402, Washington, DC 20554; Web site:

www.bcpiweb.com;

phone: (800) 378-3160; (2) Lisa Hone, Telecommunications Access Policy Division, Wireline Competition Bureau, 445 12th Street SW., Room 6-A326, Washington, DC 20554; email:

Lisa.Hone@fcc.gov

; and (3) Charles Tyler, Telecommunications Access Policy Division, Wireline Competition Bureau, 445 12th Street SW., Room 5-A452, Washington, DC 20554; email:

Charles.Tyler@fcc.gov

.

Filing and comments are also available for public inspection and copying during regular business hours at the FCC Reference Information Center, Portals II, 445 12th Street SW., Room CY-A257, Washington, DC 20554. Copies may also be purchased from the Commission's duplicating contractor, BCPI, 445 12th Street, SW., Room CY-B402, Washington, DC 20554. Customers may contact BCPI through its Web site:

www.bcpi.com

, by email at

fcc@bcpiweb.com

, by telephone at (202) 488-5300 or (800) 378-3160 or by facsimile at (202) 488-5563.

Comments and reply comments must include a short and concise summary of the substantive arguments raised in the pleading. Comments and reply comments must also comply with § 1.49 and all other applicable sections of the Commission's rules. We direct all interested parties to include the name of the filing party and the date of the filing on each page of their comments and reply comments. All parties are encouraged to utilize a table of contents, regardless of the length of their submission. We also strongly encourage parties to track the organization set forth in the NPRM in order to facilitate or internal review process.

For additional information on this proceeding, contact Regina Brown at (202) 418-0792 or James Bachtell at (202) 418-2694 in the Telecommunications Access Policy Division, Wireline Competition Bureau.

I. Introduction

1. In this Notice of Proposed Rulemaking (NPRM), we initiate a thorough review and update of the E-rate program (more formally known as the schools and libraries universal service support mechanism), building on reforms adopted in 2010 as well as the Commission's reforms of each of the other universal service programs. During the past 15 years, the financial support provided by the E-rate program has helped revolutionize schools' and libraries' access to modern communications networks. E-rate-supported Internet connections are crucial for learning and for the operation of modern schools and libraries. Increasingly, schools and libraries require high-capacity broadband connections to take advantage of digital learning technologies that hold the promise of substantially improving educational experiences and expanding opportunity for students, teachers, parents and whole communities. As a result, there is a growing chorus of calls to build on the success of the E-rate program by modernizing the program and adopting clear forward-looking goals aimed at efficiently and effectively ensuring high-capacity connections to schools and libraries nationwide.

2. E-rate has been instrumental in ensuring our schools and libraries have the connectivity necessary to enable students and library patrons to participate in the digital world. When Congress passed the Telecommunications Act of 1996 authorizing the creation of the E-rate program, only 14 percent of classrooms had access to the Internet, and most schools with Internet access (74 percent) used dial-up Internet access. By 2005, nearly all schools had access to the Internet, and 94 percent of all instructional classrooms had Internet access. Similarly, by 2006, nearly all public libraries were connected to the Internet, and 98 percent of them offered public Internet access. The challenge we now face is modernizing the program to ensure that our nation's students and communities have access to high-capacity broadband connections that support digital learning while making sure that the program remains fiscally responsible and fair to the consumers and businesses that pay into the universal service fund (USF or Fund).

3. In schools, high-capacity broadband connectivity, combined with cutting-edge educational tools and content, is transforming learning by providing customized teaching opportunities, giving students and teachers access to interactive content, and offering assessments and analytics that provide students, their teachers, and their parents, real-time information about student performance. High-capacity broadband is also expanding the boundaries of our schools by allowing for interactive and collaborative distance learning applications, providing all students—from rural communities to inner cities—access to high-quality courses and expert instruction, no matter how small a school they attend or how far they live from experts in their field of study. High-capacity broadband platforms and the educational options they enable are particularly crucial for providing all students, in both rural and urban communities, customized and personalized education and access to cutting-edge learning tools in the areas of science, technology, engineering and math (STEM) education, thus preparing our students to compete in the global economy.

4. In libraries, high-capacity broadband access provides patrons the ability to search for and apply for jobs; learn new skills; interact with federal, state, local, and Tribal government agencies; search for health-care and other crucial information; make well-informed purchasing decisions; engage in life-long learning; and stay in touch with friends and family. In Idaho, for example, the state agency's Libraries Linking Idaho database portal, available in all Idaho libraries, provides essential resources to library patrons such as an online video encyclopedia and a program to provide tools for test preparation and skill-building. Additionally, the Chicago Public Library's YOUMedia and The Labs at the Carnegie Library of Pittsburgh offer young people an opportunity to produce rich, multi-media products using the latest technology tools while connecting these learning experiences directly back to school and careers. Further, the Howard County Public Library in Maryland houses a Learning Lab to engage young adults in using new and emerging media and technology. Libraries are uniquely important because they provide Internet access to all residents in communities they serve. In addition, libraries support distance learning and continuing education for college and adult students.

5. There is strong evidence and growing consensus that E-rate needs to sharpen its focus and provide schools and libraries with high-capacity broadband connections. In response to a 2010 Commission survey of E-rate funded schools and libraries, only 10 percent of survey respondents reported broadband speeds of 100 Mbps or greater, while 48 percent reported broadband speeds of less than 10 Mbps. Approximately 39 percent of the respondents cited cost of service as a barrier in meeting their needs, and 27 percent cited cost of installation as a barrier.

6. Likewise, although the speeds of library connections have been increasing over time, many libraries report that speeds are insufficient to meet their growing needs. An annual survey done by the American Library Association (ALA) shows that in 2011-2012, while 9 percent of libraries reported connection speeds of greater than 100 Mbps, 25 percent of libraries still have speeds of 1.5 Mbps or less, and approximately 62 percent of libraries reported connection speeds of 10 Mbps or less. Thus, notwithstanding the trend towards faster speeds, 41 percent of libraries reported that their speeds fail to meet their patrons' needs some or most of the time.

7. Last month, President Obama announced the ConnectED initiative aimed at connecting all schools to the digital age. The ConnectED initiative seeks to connect schools and libraries serving 99 percent of our students to next-generation high-capacity broadband (with speeds of no less than 100 Mbps and a target speed of 1 Gbps) and to provide high-capacity wireless connectivity within those schools and libraries within five years. President Obama has called on the Commission to modernize and leverage the E-rate program to help meet those targets. Teachers, local school officials, state education leaders, digital learning experts, and businesses from across the country endorsed President Obama's vision and have called for an update to the E-rate program to meet today's teaching and learning needs.

8. In voicing his support for President Obama's ConnectED initiative, Senator John D. Rockefeller IV, one of the original supporters of the E-rate program, explained: “[I]n its almost two decades, the E-Rate program has fundamentally transformed education in this country—we have connected our most remote schools and libraries to the world. But as impressive and important as the E-Rate program has been, basic Internet connectivity is no longer sufficient to meet our 21st Century educational needs.” Even more recently, the bipartisan Leading Education by Advancing Digital (LEAD) Commission has taken up the call and released a blue print for paving a path to digital learning in the United States which highlights “inadequate high-speed Internet connectivity in the classrooms”

as “the most immediate and expensive barrier to implementing technology in education,” and calls modernizing E-rate the “centerpiece of solving the infrastructure challenge.”

9. The need for E-rate reform is also clear given the extraordinary demand for existing E-rate support. For this funding year, schools and libraries sought E-rate funding in excess of $4.9 billion, more than twice the annual cap of $2.25 billion. The E-rate funding cap was set by the Commission when it created the E-rate program in 1997 and demand for funds has exceeded the cap every year since the inception of the program. Moreover, technology is constantly evolving, so to be most effective, the E-rate program must evolve to meet the current and future needs of schools and libraries. Therefore, in this NPRM, we seek to modernize E-rate to ensure that it can most efficiently and effectively help schools and libraries meet their connectivity needs over the course of the rest of this decade and the next.

10. Three years ago, the Commission took important initial steps to modernize E-rate to improve efficiency and respond to the increasing technological needs of schools and libraries in response to recommendations made in the National Broadband Plan. The reforms, adopted in the

Schools and Libraries Sixth Report and Order,

75 FR 75393, December 3, 2010, focused on: (1) Providing greater flexibility to schools and libraries in their selection of the most cost-effective broadband services; (2) streamlining the E-rate application process; and (3) improving safeguards against fraud, waste, and abuse. Among other things, the Commission allowed schools and libraries to lease dark fiber from any entity, including state, municipal or regional research networks and utility companies; made permanent a rule to allow schools to open their facilities to the public when schools are not in session so that community members may use the school's E-rate supported services on the school's campus; and established the Learning On-The-Go (also known as E-rate Deployed Ubiquitously (EDU) 2011) pilot program to investigate the merits and challenges of wireless off-premises connectivity services for mobile learning devices.

11. In this NPRM, we seek comment on ways to build on these steps and more comprehensively modernize E-rate, including improving the efficiency and administration of the program. We begin by proposing explicit program goals and seeking comment on specific ways to measure our progress towards meeting those goals. During the last two years, the Commission has established goals and measures as part of modernizing the three other universal service support programs. Today, we propose to do the same for the E-rate program. We then seek comment on a number of possible approaches to achieving each of our proposed goals.

12. Thus, the balance of this NPRM is organized into the following six sections:

• In Section II, we propose three goals for the E-rate program:

(1) Ensuring schools and libraries have affordable access to 21st Century broadband that supports digital learning;

(2) Maximizing the cost-effectiveness of E-rate funds; and

(3) Streamlining the administration of the E-rate program.

We also propose to adopt measures for each of the proposed goals.

In proposing to adopt specific goals and measures, we seek to focus available funds on the highest communications priorities for schools and libraries and, over time, to determine whether E-rate funds are effectively targeted to meet those goals.

• In section III, we focus on the first proposed goal and seek comment on ways to modernize and reform the E-rate program to better ensure eligible schools and libraries have affordable access to high-capacity broadband. First, we propose to focus E-rate funds on supporting high-capacity broadband to and within schools and libraries, and we seek comment on updating the list of services eligible for E-rate support. Second, we seek comment on various options for ensuring equitable access to limited E-rate funding. Finally, we seek comment on what other measures we could take if these steps, combined with the other efficiency measures proposed elsewhere in this NPRM, appear insufficient to meet our program goals. In particular, we seek comment on potential options to focus additional state, local, and federal funding on school connectivity and to lower the costs of new high-capacity broadband deployment to schools and libraries.

• In section IV, we focus on the second proposed goal and seek comment on maximizing the cost-effectiveness of E-rate purchases, including how we can encourage increased consortium purchasing; create bulk buying opportunities; increase transparency of spending and prices; amend the competitive bidding processes; and encouraging efficient use of funding. We also seek comment on a pilot program to incent and test more efficient purchasing practices.

• In section V, we focus on the third proposed goal and seek comment on ways to streamline the administration of the E-rate program by, among other things, requiring electronic filing of all documents with the E-rate program Administrator, the Universal Service Administrative Company (USAC); increasing transparency of USAC's processes; speeding USAC's review of E-rate applications; simplifying the eligible services list; finding more efficient ways to disburse E-rate funds; addressing unused E-rate funding; and streamlining the E-rate appeals process.

• In section VI, we seek comment on several additional issues relating to the E-rate program that have been raised by stakeholders, including issues related to school and library obligations under the Children's Internet Protection Act (CIPA); identifying rural schools and libraries; changes to the National School Lunch Program; fraud protection measures; use of E-rate supported services for community Wi-Fi hotspots; and procedures for dealing with national emergencies.

In seeking comment on our proposed goals and measures, and on options to modernize E-rate to better align it with these goals, in addition to specific questions posed throughout, we encourage input from Tribal governments and ask generally whether there are any unique circumstances on Tribal lands that would necessitate a different approach. Similarly, we request comment on whether there are any unique circumstances in insular areas that would necessitate a different approach.

II. Goals and Measures

A. Ensuring Schools and Libraries Have Affordable Access to 21st Century Broadband That Supports Digital Learning

1. Proposed Goal

13. The first goal of the E-rate program we propose to adopt is to ensure that schools and libraries have affordable access to 21st Century broadband that supports digital learning. As discussed above, the communications priorities of schools and libraries have shifted as they seek access to higher-speed connectivity and to allow students and teachers to take advantage of the rapidly expanding opportunities for interactive digital learning.

14. Section 254(h) of the Act, requires the Commission to enhance access to advanced telecommunications and information services to schools and libraries “to the extent technically feasible and economically reasonable,” and determine a discount level for all E-

rate funded services that is “appropriate and necessary to ensure affordable access to and use of such services.” Thus, in considering our statutory obligations and in light of the growing technological needs of schools and libraries, this proposed goal has two components. The first component of this proposed goal requires that all schools and libraries have access to high-capacity broadband connectivity necessary to support digital learning. The second component of this goal is that schools and libraries be able to afford such services.

15. We also seek comment on whether we should adopt specific goals for other communications services, including voice services. If so, what should those goals be and how can we best harmonize those goals with our proposed goal of ensuring schools and libraries have access to 21st Century broadband that supports digital learning?

2. Proposed Measurements

16. We seek comment on what performance measure or measures we should adopt to support our proposed goal of ensuring eligible schools and libraries have affordable access to high-capacity broadband at speeds that will support digital learning. We also seek comment on how best to perform the relevant measurements.

17. One of the primary measures of progress towards meeting this goal would be benchmarking the performance of schools' and libraries' broadband connections against specific speed targets. We also seek comment on other measures of the availability and affordability of high-capacity broadband to schools and the educational impact of high-capacity broadband in the classroom. We seek comment on whether these are the areas on which we should focus in measuring progress towards this goal. We also seek comment on how other network performance measurement efforts, including the Commission's own Measuring Broadband America Program, should inform our consideration of how to measure network performance. Commenters are encouraged to propose any additional or alternative measures.

18.

Connectivity metrics.

We seek comment on how to define “broadband that supports digital learning” for purposes of measuring progress toward our first goal. President Obama's ConnectED initiative set a target of at least 100 Mbps service with a target of 1 Gbps to most schools and libraries within 5 years. The ConnectED proposals are consistent with those made by the State Education Technology Directors Association (SETDA). According to SETDA, in order to have sufficient broadband access for enhanced teaching and learning, K-12 schools will need Internet connections of at least 100 Mbps per 1,000 students and staff (users) by the 2014-15 school year and at least 1 Gbps Internet access per 1,000 users by the 2017-18 school year.

19. We seek comment on adopting the SETDA target of ensuring that schools have 100 Mbps per 1,000 users increasing to 1 Gbps per 1,000 users. SETDA also recommends that a school within a district have Wide Area Network (WAN) connectivity to other schools within their district of at least 10 Gbps per 1,000 students and staff by 2017-2018. We also seek comment on adopting that target for WAN connectivity.

20. More specifically, we seek comment on whether the SETDA targets are appropriate for all schools, or whether we should set some other minimum levels of broadband speed necessary to meet our proposed goal, and what those levels should be. How much capacity do schools currently use? How are schools' bandwidth needs changing, particularly in those schools that have one-to-one device initiatives? We also seek comment on what our goals should be for schools or school districts with less than 1,000 students and staff if we do adopt the SETDA targets. Will schools with 500 students need 500 Mbps Internet capacity, and how much WAN connectivity will they need? How about schools with 100 students? We also seek comment on the timing of reaching these proposed bandwidth targets for schools. What percent of schools currently have 100 Mbps per 1,000 users? What percent of schools currently have 1 Gbps per 1,000 users? How quickly are schools already moving towards these targets? What percent of schools currently have fiber connectivity to the school? How much would it cost to reach these targets? What are the challenges for schools and the E-rate program in meeting these targets?

21. We also seek comment on the appropriate bandwidth target for libraries. According to the Gates Foundation, the State Library of Kansas has developed a broadband capacity tool that recommends that all libraries have a minimum of 1 Gbps Internet connectivity by 2020 and recognizes that libraries with a large number of connected users will likely need even greater capacity. We seek comment on whether a target of 1 Gbps for all libraries by 2020 is an appropriate measure or whether we should set some other minimum level of broadband speed for libraries necessary to meet our proposed measure and what that should be. We also seek comment on whether we should adopt a WAN connectivity target for libraries interconnected by WANs, and if so, what that target should be. We also seek comment on the target date of 2020 for libraries to have 1 Gbps Internet connectivity. What are the challenges to libraries and the E-rate program of meeting this goal? What percent of libraries currently have 100 Mbps connectivity? What percent of libraries currently have 1 Gbps connectivity?

22. Further, we seek comment on whether there are schools and libraries in some extremely remote parts of our country where the SETDA and the State Library of Kansas capacity targets may not be economically feasible. If so, why are the SETDA or the State Library of Kansas targets unfeasible and what are feasible connectivity targets or benchmarks for those extremely remote geographic areas?

23. As part of the ConnectED initiative, President Obama also called for high-capacity connectivity within schools, and others, including the bi-partisan LEAD Commission, have echoed that proposal. We seek comment on adopting specific bandwidth targets for wireless connectivity within schools, similar to our targets for Internet and WAN bandwidth. Specifically, we seek comment on whether all schools should have internal wireless networks capable of supporting one-to-one device initiatives, and whether libraries should have comparable wireless connectivity. We seek comment on more quantitatively defining these standards. Should we define connectivity in Mbps of wireless capacity available per-student in classrooms, school libraries, and other areas of schools? Should these match the Internet or WAN connectivity recommendations of SETDA? For example, building off SETDA's 2017 recommendation of 100 Mbps Internet connectivity per 1000 students, should we aim for 1 Mbps of wireless capacity per 10 students in classrooms and other learning spaces? What would this standard generally require to implement? We seek comment on this proposal and on alternative bandwidth targets.

24. Many of the applications that enable digital learning require not just high-capacity connections, but also high-quality connections that have associated latency, jitter and packet loss requirements. For example, online viewing of a real-time science lecture and demonstration requires low latency (transmission delay), low jitter

(variability in the timing of packets' arrival), and low packet loss. Should we adopt latency, jitter and packet loss performance requirements tailored to the specific uses of broadband connectivity by schools and libraries to ensure successful learning experiences? If so, what such requirements should be? We also seek comment on how best to update network performance requirements as technology and network uses evolve.

25.

Using adoption to measure availability and affordability.

The simplest measure of broadband availability and affordability for schools and libraries may observe whether eligible schools and libraries are purchasing broadband services that meet our proposed speed benchmarks. We therefore seek comment on whether to measure school and library broadband speeds as one metric of broadband availability and affordability.

26. If we adopt this proposal, we seek comment on how best to collect data on the speed and quality of school and library connections. Currently, all schools and libraries must complete an FCC Form 471 application when applying for E-rate funding, and among other things, are requested to provide information about the level of broadband services requested on that form. The Commission is currently seeking comment on modifying the FCC Form 471 to collect more detailed information from applicants on connection speeds and the types of technologies being used for connectivity.

27. We seek comment on additional ways to update the FCC Form 471 to provide information necessary to monitor and measure our proposed goal. Should we require that E-rate applicants provide specific information about the bandwidth or speed for which they seek funding? Should we make that information publicly available? Should there be specific, required mechanisms for making the information public? For example, should we require such information be published on data.gov?

28. Should we adopt additional measures based on information we gather? For example, should we measure the difference in each school's or library's baseline capacity and speed for each workstation or device over a specified time period?

29. We seek comment on whether there are other methods we should consider adopting for measuring broadband performance, including not only bandwidth available but actual usage as well. We also seek comment on how measuring actual usage would take into account the different possible reasons for level of usage. For example, how would such a measurement account for schools that use broadband connections less because the speeds available are too slow for use of educational software or other reasons? In addition, how do we account for levels of usage that vary based on the availability of teacher technology training? In addition to collecting information on the FCC Form 471, should we conduct an annual or biennial survey to assess the broadband capability of schools and libraries? If so, should it be modeled on the survey of E-rate recipients that the Commission conducted in 2010?

30. In the alternative, should we require some or all E-rate applicants to have dedicated equipment measuring performance to and within each of their buildings? If so, what would be the cost of such a requirement and what would be the benefits? Should we require applicants to pay for such equipment or provide E-rate support for such equipment and the related information collection? Should we make the collected information available to the public? We ask for recommendations on performance measurement systems that are low cost and of minimal burden; easy to implement; low-impact; that will produce uniform results and test a full range of performance metrics; and that include a proven design and are generally accepted as valid testing.

31. Are there other less burdensome methods that would still ensure we are able to examine and employ useful information in lieu of requiring all applicants to employ equipment to test broadband? For example, could we test a sample of schools? Are most schools and libraries or their service providers already measuring the speed of their broadband connections? Are there cost-efficient ways of collecting that information from schools and libraries? Several years ago, the Commission created the Measuring Broadband America Program to measure residential broadband performance. Should we adopt a national performance measurement system for schools and libraries similar to our Measuring Broadband America Program? If so, how could we accommodate measuring not only average or peak performance but also actual usage? We recognize that some third parties are already attempting to collect some such information. For example, Education Superhighway is encouraging schools to participate in its national School Speed Test program. Are there ways the Commission can use the information collected by Education Superhighway or other third-party groups to measure progress towards this goal?

32. As part of measuring progress towards the goal of ensuring eligible schools and libraries have affordable access to high-capacity broadband at speeds that will support digital learning, we seek comment on how to measure high-capacity broadband availability and affordability and the metrics that should be used.

33. For example, to measure availability, should we use the National Broadband Map to estimate what fraction of schools and libraries have access to at least one broadband provider within the same census block offering broadband at speeds that meet our proposed performance metrics? If so, what geographic vicinity should we use? Should we use census blocks as the measure? Should we supplement National Broadband Map data with other information? Instead, or in addition, should we collect data on the number of zero-bid service requests as a measure of service availability?

34. Similarly, to measure affordability, we could benchmark the post-discount prices paid by schools for broadband connections against some objective measure. We seek comment on this approach, and on what measures we could use. Would there be benefit to conducting an annual or biennial survey to measure school and library perceptions about affordability? If so, what questions should we ask? Alternatively, should we survey just those schools that do not adopt broadband connections meeting our performance targets to find out why they have not done so?

35. We also seek comment on whether the Commission should measure compliance with its “lowest corresponding price” rule as a measure of affordability to ensure that service providers are providing schools and libraries with the lowest corresponding price for E-rate supported services that a provider charges to a similarly situated non-residential customer. The rule mandates that service providers cannot charge schools, school districts, libraries, library consortia, or consortia including any of these entities a price above the lowest corresponding price for supported services, unless the Commission, with respect to interstate services, or the state commission with respect to intrastate services, finds that the lowest corresponding price is not compensatory.

36.

Educational Impact Measurements.

Is there a way to measure how success in the classroom is affected by access to E-rate funding or services supported by E-rate?

Stakeholders have, in the past, raised concerns with attempts to correlate E-rate funding with educational outcomes. Critics claim that because classroom performance is affected by many factors, there are no reliable conclusions to be drawn. However, proponents believe that assessing the contribution of digital learning and E-rate funded connectivity towards student outcomes may guide schools in determining the bandwidth and usage of broadband that are most effective as well as provide us guidance in ensuring that universal service dollars are efficiently spent. Is there a way to measure how success in the classroom is affected by access to E-rate funding or access to Internet access services? If so, what should such measures look like, and should they be tied specifically to E-rate funding or more generally to the deployment or use of broadband and next-generation infrastructure? A 2006 study by Austan Goolsbee and Jonathan Guryan found that E-rate support substantially increased the investment of some public schools in Internet and communications technologies, but did not find a statistically significant effect on student test scores. Have more recent studies suggested otherwise? We also seek comment on whether the Commission should adopt educational-outcome measurements. Is it appropriate for the Commission to do so, given that educational outcomes are outside the agency's core competence? Are there any legal or jurisdictional issues with doing so?

B. Maximizing the Cost-Effectiveness of E-Rate Funds

1. Proposed Goal

37. We propose to adopt, as the second goal of the E-rate program, to maximize the cost-effectiveness of E-rate funds. Ensuring that schools and libraries spend E-rate money in the most cost-effective ways possible maximizes the impact of limited E-rate funds and helps ensure that all eligible schools and libraries are able to receive all the support they need. Funds available through the E-rate program come from contributions made by consumers and businesses to the USF, and the Commission has a responsibility to ensure they are spent effectively.

38. This proposed goal is consistent with section 254(h)(2)(A) of the Communications Act, which requires that support to schools and libraries be “economically reasonable.” As the Commission has previously observed, we have a “responsibility to be a prudent guardian of the public's resources.” We seek comment on this proposed goal.

2. Proposed Measurements

39. We seek comment on what performance measure or measures we should adopt to support the goal of maximizing the cost-effectiveness of purchases made using E-rate funds. Should we measure the value delivered to schools and libraries with support from the E-rate program by tracking the prices and speed of the broadband connections supported by the program? Should we measure an applicant's costs per-student and costs of products and services in comparison with other costs for products and services available in the marketplace? Are there additional data we would need to require from applicants to track relevant measures, or are there existing data repositories we could use for this purpose? Above, we seek comment on a number of possible affordability measures. Should we use any of these to measure cost-effectiveness instead of, or in addition to, affordability?

40. What data will best allow us to track these metrics? Should we encourage studies on the impact of E-rate support on prices paid for services? We currently report on the results of USAC's audits, and progress in reducing improper payments and waste, fraud and abuse. Should we use this information as part of this measurement?

C. Streamlining the Administration of the E-Rate Program

1. Proposed Goal

41. We propose to adopt, as the third goal of the E-rate program, to streamline the administration of the E-rate program. The number of applications the Administrator, USAC, receives from schools and libraries seeking E-rate support is daunting. For example, in funding year 2013, at the close of the application filing window, USAC received 46,189 applications seeking an estimated $4.986 billion in support. In some cases applicants request more in funding commitments than they actually use, and there is no requirement or incentive for applicants to notify USAC in a timely fashion that they have received funding commitments that they will not use. Moreover, the application and disbursement processes are complicated, so that many schools and libraries now feel compelled to spend money on E-rate consultants just to navigate the E-rate processes. Thus, it is essential that we continue to improve the E-rate program procedures and continue to simplify and streamline the program's application review and disbursement processes.

42. This goal therefore includes further streamlining and simplification of the application, review, commitment and disbursement processes, in order to make the most of E-rate funding and accelerate the delivery of support for high-capacity broadband at speeds that will support digital learning, while maintaining appropriate safeguards against waste and abuse. We seek comment on this proposed goal. We are mindful that the Commission and USAC have a duty to protect against waste, fraud and abuse in the program and that the procedures intended to protect against waste, fraud and abuse can complicate and slow down program administration. Therefore, we also seek comment on ways to reconcile the need to simplify the program with the need to protect against waste, fraud and abuse.

2. Proposed Measurements

43. We seek comment on what performance measure or measures we should adopt to support the proposed goal of streamlining the administration of the E-rate program. In 2007, the Commission adopted certain output measurements for evaluating the effectiveness of the E-rate program related to the application and invoicing processes and the resolution of appeals submitted to USAC. Specifically, the Commission required USAC to provide data, on a funding year basis by reporting the number of applications and funding request numbers (FRNs) submitted, rejected, and granted, and the processing time for applications and FRNs. The Commission also required USAC to document the amount of time it takes to make a billed entity applicant reimbursement payment to the service provider, and the number of paid and rejected invoices. Additionally, the Commission required USAC to determine the percentage of appeals resolved by USAC within 90 days from the date of appeal, and how long it takes to process 50 percent, 75 percent, and 100 percent of the pending appeals from the schools and libraries division.

44. What additional measurements should we adopt? The State E-rate Coordinators Alliance (SECA) previously suggested establishing deadlines for making priority one funding commitments and the payment of invoices. As noted above, the Commission currently requires USAC to report data measures for commitments, disbursements and appeals. Should specific targets be established for each of those categories? If so, how should

we establish those targets? Should we require USAC to improve on those targets each year or to maintain a certain level of performance?

45. Should we set goals for funding commitments by USAC to applicants as compared to actual disbursements by funding year? In addition, how should we ensure the administrative budget is appropriate for the program? Should we establish targets for the cost of administering the program compared to the program funds disbursed to recipients? Should we measure the number of students and patrons served with E-rate funding over a specified period of time? If so, what should we compare the results to? For example, should we compare it to other federal programs that administer the disbursement of subsidies, such as other USF programs, the Broadband Technology Opportunities Program (BTOP) or educational grant programs?

46. We also seek comment on whether we should adopt a proposal by SECA that USAC be required to retain an independent third party to perform an annual analysis of the barriers to schools and libraries participating in the E-rate program. If such an analysis is warranted, should it be performed annually, as proposed, or on some other time period, such as every three years?

47. We are also mindful of the cost to applicants associated with participating in this program and we seek ways to reduce and measure these costs. Should we collect data regarding administrative costs E-rate applicants incur throughout the application process? If so, what are the best methods to obtain that data? Should applicants be required to disclose on an FCC form the amount of time and cost spent preparing an application? Should we instead consider a survey or sample of participants to obtain this and other information relevant to determine the financial impact including, for example, the cost of hiring an E-rate consultant?

D. Data Collection

48. Finally, we seek comment on a number of cross-cutting issues regarding the collection of accurate, relevant and timely data to track our progress in meeting these goals. We seek comment on the benefits and burdens of requiring E-rate recipients and service providers to provide data to USAC in open, machine-readable formats in order to enhance the accessibility and usefulness of the data. We also seek general comment on what data we collect during the application and disbursement process that should make public. Are there any barriers to making public any data we collect that helps measure our progress towards meeting our proposed goals? Will making such data public encourage the public to develop new and innovative methods to analyze E-rate data? If there are concerns about protecting the confidentiality of some of the data, are there ways to protect sensitive information while still making public the most relevant data or are there ways to aggregate the data to obviate confidentiality concerns? Finally, we seek comment on the extent to which we should apply the principles of the Office of Management and Budget's (OMB's) Open Data Policy to our efforts to collect and share E-rate data?

49. In addition to the specific revisions suggested above, should we revise any of the Commission's E-rate forms, such as the FCC Form 471 application, Item 21, or the FCC Form 500, to collect new data, or to change the formats in which we collect data? For example, should we revise the Item 21 attachment to the FCC Form 471 to collect data more consistently from all applicants? Are there ways we can change the format of the Item 21 to collect more granular data in a way that will allow us to more easily identify what products and services applicants are purchasing and at what prices? Commenters who advocate changes in data collection should indicate which form(s) and what specific revisions we would need to make on those forms in order to ensure that we receive useful information.

50. We also seek comment on essential definitions for purposes of measurement. When considering different policy outcomes, what are the key concepts that require a formal common definition upfront to enable more desirable measurements

(e.g.,

“per school,” “per-student,” “per patron”)? Unique persistent identifiers are important because they designate which entity is being dealt with and also are used to model relationships. Are there unique persistent identifiers for schools, school districts and libraries? For example, are locale codes used by the U.S. Department of Education's National Center for Education Statistics (NCES), also known as urban-centric locale codes, good identifiers to use for schools and school districts? To the extent existing identifiers are missing or have problems, would there be value in creating persistent identifiers or supplementing existing identifiers for some or all such entities, or for other types of applicants? What would be the requirements of such persistent identifiers?

51. Finally, are there goals and measures that we should adopt that we have not already discussed? Commenters should be as specific as possible about their proposed goals and measures.

III. Ensuring Schools and Libraries Have Affordable Access to 21st Century Broadband That Supports Digital Learning

52. In this section, we seek ways to further our proposed first goal for the E-rate program: ensuring schools and libraries have affordable access to high-capacity broadband services that support digital learning. We explore methods to focus E-rate funds on supporting high-capacity broadband to and within schools and libraries, to ensure equitable access to limited E-rate funds, and to lower new build costs and tap into other funding sources.

A. Focusing E-Rate Funds on Supporting Broadband to and Within Schools and Libraries

53. To support the goal of ensuring that schools and libraries have access to affordable high-capacity broadband, both to and within schools and libraries, we propose to update the E-rate program's funding priorities, and seek comment on how to do so. In particular, we seek comment on possible updates to the list of services eligible for E-rate support and the related rules to focus funding on those services that provide high-capacity broadband to school and library buildings and those services and equipment that disseminate the high-capacity broadband within those buildings, while deprioritizing or phasing out support for services associated with legacy technologies and services that have little direct educational application.

54. We recognize that E-rate has historically provided support for voice services, and voice services remain essential for communications and public safety at schools and libraries. However, we also recognize that voice services may increasingly be transitioning to a low-marginal-cost application delivered over broadband platforms. We seek comment on how to approach voice services within this framework.

1. Funding for Broadband Connections

55.

Technological architecture.

We begin by seeking general comment on the most efficient technological architectures that schools and libraries are likely to use for connectivity. Are fiber connections generally the most cost effective and future-proof way to deliver high-capacity broadband to community anchor institutions like schools and libraries? Are other

technologies, such as point-to-point microwave or coaxial cable, which are widely used to provide high-capacity broadband to schools and libraries today, also efficient and cost-effective ways to provide service as bandwidth demands increase?

56. Smaller schools and libraries may not need the bandwidth provided by fiber connectivity and, particularly for small rural and Tribal schools and libraries, fiber connectivity to the school or library may not currently be available in some areas, or requires the payment of very high up-front construction charges. For these schools and libraries, what are the most cost-effective ways to meet high-capacity broadband needs? Are there fixed wireless solutions that are cost-effective for such schools? Are there some schools where satellite connectivity is the only viable option?

57. How do schools generally purchase connectivity? As an all-inclusive service? Or do schools purchase long-term indefeasible rights of use (IRUs) in physical infrastructure separately from managed services? What approaches are most efficient?

58. Fiber deployment. In the

Schools and Libraries Sixth Report and Order,

subject to certain limitations, the Commission added dark fiber to the list of services eligible for E-rate support. We seek comment on how schools and libraries have incorporated dark fiber into their broadband deployment plans as the result of this change.

59. To further improve applicants' flexibility in finding cost effective ways to deploy high-capacity broadband, we propose to make our treatment of lit and dark fiber more consistent. The E-rate program currently supports the recurring costs of leasing lit and dark fiber as priority one services. When a school or library leases lit fiber, the modulating electronics necessary to light that fiber are included in the recurring supported cost of the service and are therefore funded as part of the priority one service. By contrast, a school or library that leases dark fiber will not receive priority one support for the modulating electronics necessary to light the dark fiber. To eliminate this disparity, we propose to provide priority one support for the modulating electronics necessary to light leased dark fiber.

60. Installation charges for lit and dark fiber are also treated somewhat differently under current rules. Currently, the E-rate program provides priority one support for the installation of lit or dark fiber up to the property line of eligible schools and libraries. It also supports all “special construction charges” for leased lit fiber, but does not support “special construction charges” for leased dark fiber beyond an entity's property line. Special construction charges include design and engineering costs, project management costs, digging trenches and laying fiber. In order to maximize the options available for schools and libraries seeking to deploy fiber to their premises, we propose to provide priority one support for special construction charges for leased dark fiber, as we do for leased lit fiber.

61. Additionally, although the E-rate program currently provides support for some installation and special construction charges, it requires the cost of large projects to be spread over three years or more. The Commission's intent in requiring the cost to be spread over multiple years was to reduce the demand on the fund, but it may have the unintended consequence of deterring efficient investments, including the deployment of fiber. Should we continue to require that large installation and construction costs be spread over multiple years? If so, what should the threshold be for requiring that costs be spread over multiple years? Is three years the right period? Does the answer depend on how many sites are being connected?

62. We seek comment on the cost to deploy fiber or other technologies that would provide high-capacity broadband connectivity to schools. We also seek comment on other aspects of support for installation and construction charges. Is there a limit to the amount of funding we should provide to any one library, school or school district over a certain amount of time for construction and installation costs? Are there specific costs that we should or should not fund as part of installation and construction? Are there other approaches we should consider in dealing with high installation and construction costs? We seek comment on whether fiber deployment to schools and libraries being slowed because applicants cannot afford to pay the non-discounted portion of deployment costs. Are there any other conditions we should impose on applicants who seek prioritized support for lit or dark fiber and modulating electronics? Are there ways to cost effectively deploy fiber and minimize recurring costs to schools and libraries?

63. We also seek comment on whether prioritizing special construction charges to deploy fiber or other technologies from middle mile networks to schools and libraries (lateral fiber builds) by dedicating a specific amount of E-rate funding to support such deployment would help meet our connectivity goals. Would some prioritization to support lateral fiber builds create long term cost efficiencies for schools and libraries and for the E-rate program? If so, what should that amount be? Should we encourage or require schools and libraries to enter into long-term IRUs or other long-term arrangements on such lateral builds to get the maximum value of initial investments in fiber? How should we determine the rules of priority for such funding and how much funding should be allocated to each applicant? For example, should funding for fiber builds be distributed based on the poverty level of the students at a school, rurality, location on Tribal lands, lack of fiber or other high-capacity broadband connections to community anchor institutions, or some other objective, observable metric? How much support do we need to provide to make it possible for schools and libraries to apply for such funds, particularly in rural, tribal and other areas where deployment is likely to be expensive? Should we also consider allowing applicants to amortize the costs over a period of time longer than the three years currently required?

64. Is there a role for the states or Tribal governments to play in determining priority for such funds? For example, should we seek state and Tribal government recommendations for the neediest communities (

e.g.,

low income or schools or libraries without broadband), allowing the Commission to make the final determinations based on the amount of funding set aside for particular schools and libraries for fiber lateral builds? We specifically seek comment on any other factors to determine priority of funding for fiber lateral builds. We also seek comment on any potential requirements for receipt of specific support for fiber lateral builds. Should we, for example, require community access to high-capacity broadband facilities in exchange for such funding? We ask commenters to be as specific as possible in response to these questions.

65. If we prioritize some funding for new high-capacity broadband deployment should we be technology neutral or should we prioritize fiber connectivity over other types of broadband connectivity? Should we give schools flexibility to select the best technology that meets their needs? As discussed above there may be some schools and libraries, particularly small rural schools and libraries, where fiber deployment is either not necessary or simply cost-prohibitive. How should we address the needs of schools and libraries in areas where fiber is far less likely to be offered or available, such as Tribal lands? Are there other solutions

such as fixed wireless or cable solutions that would be sufficient today or in the future for meeting such schools' and libraries' high-capacity broadband needs? Are there deployment costs associated with any of those technologies that should be supported by the E-rate program?

66. If we seek to spur fiber or other broadband deployments through dedicated funding, are there associated changes we should make in how we fund the recurring costs for telecommunications and Internet access services, which are also priority one services today? For example, should we fund broadband deployment upgrades before recurring costs, creating a further prioritization within existing priority one services? Should we consider providing a different discount rate for ongoing services than for initial fiber upgrades? Would this approach encourage schools and libraries to enter more efficient long-term service arrangements as part of new infrastructure investments?

67.

Wide Area Networks (WANS).

Many schools and libraries use WANs to provide broadband connectivity to and among their buildings. WANs are useful for participants in the E-rate program, particularly school districts and consortia, because they provide dedicated connections between the schools within a school district or the schools and libraries within a consortium allowing them to easily share information and resources. For example, last August, Red Lion School District in Pennsylvania finished deploying a fiber-based WAN network that was supported by the E-rate program. Prior to deploying the new WAN, the district, which has nine schools, had an assortment of technologies but no school had bandwidth greater than 50 Mbps. The new WAN, which incorporates both microwave and fiber technology, provides many of the schools with 1 Gbps in bandwidth to support distance learning, social media, Web 2.0, and cloud-based services. Under the current E-rate rules, however, applicants are allowed to seek support for leased access to WANs but are not permitted to seek support for WANs that they build or purchase.

68. We seek comment on whether there are circumstances under which it will be more cost-effective for schools and libraries to build or purchase their own WAN rather than to lease a WAN. We also seek comment on whether there might be occasions where building or purchasing their own WAN is the only way for schools and libraries to get broadband access. If so, we seek comment on whether we should lift our prohibition on schools and libraries building or purchasing their own WANs by removing § 54.518 of our rules, or amend that section of our rules to allow schools and libraries to build or purchase their own WANs under certain circumstances. If the latter, we seek comment on the criteria we should use in determining whether to provide E-rate support to schools and libraries that purchase or build their own WANs.

69. In the

Healthcare Connect Fund Order,

78 FR 13935, March 1, 2013, the Commission allowed consortia to seek rural health care fund support to build and own their own network facilities if construction was determined to be the most cost-effective option after competitive bidding. However, the

Healthcare Connect Fund Order

also imposed several safeguards on the program to ensure that consortia only exercised their option to self-construct when it was absolutely necessary. Should we impose similar safeguards on schools and libraries' option to self-construct WANs in the E-rate program? Are there other E-rate supported services that we should allow applicants to self-provision? If so, what services and under what conditions?

70. More generally, are there any other rule changes needed to ensure schools and libraries can access high-capacity connections to their premises? What other steps can we take to spur efficient new broadband deployments, particularly those deployments, like new fiber builds, that will dramatically increase speeds while bringing down long-term per Mbps prices?

71. Broadband connectivity within schools and libraries. We also seek comment on options to support connectivity within schools and libraries. In recent years, the E-rate program has been unable to fund billions of dollars in requests from applicants seeking support for internal connections. For example, in funding year 2012, USAC received approximately $2.47 billion in funding requests for internal connections, and was unable to fund any requests below the 88 percent discount rate. As a result, many E-rate recipients have not received support for internal connections, and must provide full funding for needed internal connections or go without. We seek comment on the percent of schools and libraries that do not have the necessary equipment to provide high-capacity broadband connectivity within schools, and the amount it would cost to provide high-capacity broadband connectivity within such schools and libraries. We invite commenters to be as specific as possible and to provide any data they have available on this issue.

72. More broadly, we request that commenters provide data on the nature of internal networks generally deployed within schools and libraries today and the likely needs of schools and libraries going forward. Previously in this section, we asked for information about the most efficient and cost effective network architectures for deployment of high-capacity broadband. Similarly, we ask for detailed information about internal network configurations. Will school networks generally consist of wired connections between classrooms and high-capacity wireless routers in each classroom? Do schools generally have internal high-capacity wired connections to each classroom today? If so, should we focus funding on newer high-capacity wireless routers, which are needed to allow multiple simultaneous high-capacity connections in a classroom environment?

73. Are there other equipment or services necessary for high-capacity broadband connections that should qualify for prioritized support? For example, which of the internal connection services listed as priority two services on the current ESL are necessary for providing high-capacity broadband connectivity within schools or libraries? What services not on the ESL should we consider supporting? Should we, for example, consider providing support for caching services or for services necessary for providing network security for schools and libraries? Is there evidence that outdated networking equipment (firewalls, content filters, etc.) creates significant speed bottlenecks on school and library networks? Is adding these types of services to the list of supported services, so that schools and libraries have the funding necessary to update those services, needed to eliminate significant speed bottlenecks? Are there any services not currently receiving support that would allow more cost effective use of E-rate funds?

74. In 2001, the Commission prohibited E-rate recipients from obtaining discounts under the universal service support mechanism for the purchase or acquisition of technology protection measures necessary for the Children's Internet Protection Act (CIPA) compliance. At the time of the

2001 CIPA Order,

66 FR 8374, January 31, 2001, protection delivered at the network level was in its nascent stages and now schools and libraries need to employ network-level protection more ubiquitously. Should the 2001 decision to prohibit schools and libraries from receiving E-rate discounts for

technology protection measures apply to the broad spectrum of services schools and libraries employ for network security which may include, or go beyond those protections necessary for CIPA compliance, in order to maintain and protect high-capacity broadband networks? We seek comment on whether we should review the

2001 CIPA Order

decision in light of the network security needs of schools and libraries today.

75. Are there any other rule changes needed to ensure schools and libraries can effectively use high-capacity connections to their premises? What other steps can we take to spur efficient new high-capacity broadband deployment within schools and libraries.

76.

Recurring costs.

We also seek comment on the recurring costs of high-capacity broadband services. As schools and libraries have been increasingly purchasing high-bandwidth connections, how have their recurring monthly costs changed? We anticipate that in order to meet our proposed connectivity goals, the average recurring per-megabit prices of connectivity purchased by schools will need to come down substantially. Fortunately, there is precedent for significant price reductions associated with infrastructure upgrades. For example, the Commission's Rural Health Care Pilot Program showed that bulk buying through consortia coupled with competitive bidding can reduce the prices that recipients pay for services and infrastructure.

77. How can we ensure that recurring costs come down sufficiently over time within the E-rate program to make our proposed connectivity goals achievable and sustainable? Are the program's existing matching and competitive bidding requirements sufficient safeguards, or are further steps required? For example, should we phase in maximum per-megabit prices over time that are eligible for E-rate discounts, or set program-wide per-megabit price guidelines or targets? Would such prices give schools and libraries greater leverage in soliciting bids from vendors, or simply limit the choices available to schools and libraries? What should such prices be? If we set maximum per-megabit prices, should we allow exceptions in certain circumstances? What impact would such price guidelines or targets have on schools or libraries in areas that lack competition for high-capacity broadband, such as Tribal lands? How would such prices account for differences between more and less heavily-managed services? We seek comment on other options. Below, we also seek comment on how to maximize cost-efficient purchasing. Will these approaches ensure cost-effective purchasing of recurring services?

2. Phasing Down Support for Certain Services

78. Above we seek comment on modifying our rules to ensure availability of the key products and services needed for high-capacity broadband connectivity to and within schools and libraries. We now seek comment on two approaches for streamlining the remainder of the ESL to focus support on high-capacity broadband. First, we propose to phase out support for a number of specific services, including outdated services currently on the ESL, for components of voice service, and seek comment on phasing out support for services that are not used primarily for educational purposes. Second, we seek comment on more fundamentally shifting the way we direct E-rate support to focus exclusively on high-capacity broadband connectivity to and within schools. In so doing, we seek comment on whether there are additional services for which we should phase out or reduce support, including traditional telephone services. Finally, we seek comment on a number of issues that will need to be addressed whichever approach we take.

79. We recognize that flash-cuts to support in a funding year could be financially difficult for schools and libraries and therefore, throughout this section, we seek comment on phasing out support for services we remove from the ESL, rather than eliminating them immediately. We also seek comment on other changes we could make, such as assigning such services a different discount rate that would require applicants to pay for a greater share of those services than for services that we consider to be directly connected to the fundamental purpose of the E-rate program. We also seek comment on how to address bundling of supported services, including bundles that include services for which we phase out support.

a. Specific Services for Which Support May No Longer Be Appropriate

80.

Outdated services.

We first propose to phase out funding for those services that are outdated. For example, paging services are eligible for support because in 1998, the first year of E-rate funding, the adoption of mobile phones was not yet widespread and pagers filled the role of common personal and mobile communications. Paging services have grown increasingly obsolete with the advent and explosive growth of mobile technology and services, many of which are also supported by the E-rate program. Yet, paging services continue to be eligible for E-rate support, and in funding year 2011, USAC committed approximately $934,000 for paging services for more than 500 E-rate requests.

81. Likewise, directory assistance services are eligible for support because, in 1997, directory assistance was considered a core service. Now, however, Internet search has largely replaced directory services. We, therefore, seek comment on our proposal to phase out E-rate support for paging services and directory assistance.

82. Do either paging services or directory assistance service serve any important educational purposes? Is it in the public interest to continue to provide support for either paging services or directory assistance? Are there any other services that are similarly outdated and should no longer be eligible for E-rate support? For example, is there any reason to continue to provide support for dial-up services? In funding year 2011, there were more than 100 requests for approximately $95,000 in funding commitments for dial-up services. Is that still necessary today? Are there any schools or libraries that have no other option for accessing the Internet besides dial up services?

83.

Components of voice service and supplemental services.

We also propose to phase out funding for services that are simply components of voice service as well as those services, other than voice, that ride over or are supplemental to high-capacity broadband connections but are not necessary to make a broadband service functional. More specifically, we first propose to eliminate support for custom calling features, inside wiring maintenance plans, call blocking, 800 number services, and text messaging as components of voice services that may not serve educational purposes and do not further our proposed goals. USAC has estimated that it committed more than $85,000 for 800 number service in funding year 2011 and more than $75,000 for unbundled text messaging in funding year 2011. We seek comment on this proposal and we ask whether there are other such services for which we should no longer provide E-rate support?

84. We also seek comment on phasing out funding for supplemental or “ride-over” services. In the

Healthcare Connect Fund Order,

the Commission determined it would only provide support for services necessary to make a high-capacity broadband service functional as distinguished from

services or applications that ride over the network. The Commission explained that it was connectivity that served as the “input” to making the ride-over services functional and not the other way around. Although the proposed goals for the E-rate program are somewhat different from our Healthcare Connect Fund goals, should we use the

Healthcare Connect Fund Order's

concept of “ride over” services to help determine what currently supported E-rate services should be considered supplemental to broadband, and therefore no longer supported? We seek comment on whether the

Healthcare Connect Fund Order's

characterization of ride-over services is instructive for E-rate purposes.

85. Based on the concept articulated in the

Healthcare Connect Fund Order,

we seek comment on phasing out E-rate support for services that are not directly related to connectivity and seek comment on this proposal, such as electronic mail services (email) service and web hosting as supplemental services. In previous proceedings, commenters have claimed that the pricing of web hosting in the K-12 market has become skewed when compared to other commercially available web hosting services and claim that vendors have become adept at packaging their services to increase the cost of web hosting above market rates in order to decrease the cost of the ineligible services. USAC estimates that it committed $9.8 million for email services and almost $28 million for web hosting in funding year 2011. Should the E-rate fund be supporting services such as web hosting and email at costly monthly rates when many such services are cloud based and offered basically for free to other users? Is there any continuing and compelling policy reason to continue to fund such services?

86. We note that “electronic mail services” are included with in the definition of “Internet access” in § 54.5 of our rules and we therefore seek comment on whether we would need to change the definition of “Internet access” for purposes of the E-rate program if we were to stop providing support for email services. If so, should we simply delete the reference to electronic mail services in the definition of Internet access in § 54.5 of our rules? Are there are other changes we need to make to our rules if we phase down or eliminate support for the types of services discussed above? Are other services that are currently eligible for E-rate support that ride over or are supplemental to high-capacity broadband connections, but are not necessary to make a high-capacity broadband service functional?

87.

Educational purposes.

In the

Schools and Libraries Second Report and Order,

68 FR 36931, June 20, 2003, the Commission determined that activities that are integral, immediate, and proximate to the education of students, or in the case of libraries, integral, immediate, and proximate to the provision of library services to library patrons, qualify as “educational purposes.” The

Schools and Libraries Second Report and Order

also, however, provided a presumption that services provided on-campus serve an educational purpose. More recently, the Commission clarified educational purposes in

Schools and Libraries Sixth Report and Order

by requiring that schools must primarily use services funded under the E-rate program, in the first instance, for educational purposes.

88. We seek comment on whether we should make changes to the E-rate program to ensure that supported services are, at a minimum, used for the core purpose of educating students and serving library patrons. More specifically, we seek comment on whether we should allow a school or library to seek E-rate support for services that will be used only by school and library staff, administrators, or board members. If school and library staff use the supported services in their role as educators and information providers but the services are inaccessible to students and library patrons, does this satisfy the statutory requirement that the support be used for educational purposes in 47 U.S.C. 254(h)(1)(B) and that advanced telecommunications be enhanced for all classrooms and libraries in 47 U.S.C. 254(h)(2)(A)? Should E-rate funds be provided if school and library staff use such services only for administrative or other purposes not directly tied to education? If funds are provided for administrative or other purposes not directly tied to education, should they have a lower priority than funds provided for the core purpose of serving students and library patrons? Alternatively or additionally, should we stop providing E-rate support for services to non-instructional buildings, such as bus garages? If so, how should we treat non-instructional buildings, such as technology centers, that support E-rate supported services? Are there some administrative functions such as parent-teacher communication that should always be considered as primarily serving an educational purpose? Or, even if there are services that further the educational mission of the school, is it now no longer realistic to support all of these services within our budget since funding is always limited? We invite commenters to distinguish between and among E-rate supported services when responding to these questions. For example, do commenters think we should take a different approach when it comes to Internet access services as opposed to basic voice services? What changes to the E-rate program would be necessary, such as changes to our rules or required program certifications, if we were to limit E-rate funding to services directly available, at least in part, to students and patrons? Would placing limits on funding for services that are not directly available to students or patrons be too difficult to monitor or audit or raise cost-allocation challenges? Commenters should be specific in their proposals.

89.

Basic maintenance of internal connections (BMIC).

We seek comment on phasing out funding for BMIC. For funding year 2011, USAC committed nearly $125 million for BMIC. We previously sought comment on modifying our approach to funding for BMIC, and now seek to refresh the record. We recognize that maintenance in some form is necessary for broadband and other supported services to remain available to schools and libraries. However, under our current rules which fund BMIC as a priority two service, the same high-discount school districts receive more than ample funding for basic maintenance each year, while other needy schools and school districts have received no priority two support for increasingly important and necessary internal connections. Additionally, it is especially difficult for USAC to monitor compliance with rules regarding BMIC, and BMIC may therefore be more susceptible to abuse than other funded services. We therefore seek comment on whether to amend § 54.502 of our rules by deleting subsection (a)(2) and removing all other references to basic maintenance services. We also seek comment on whether there are other provisions of our rules that need to be amended if we phase out support for BMIC.

90.

Cellular data plans and air cards.

We also seek comment on how to treat support for Internet access services provided via cellular data plans, including air cards. Such services are costly, and can be provided more efficiently on-campus via an E-rate supported local area (LAN) network that connects to the Internet. Should we phase out support for cellular data plans and air cards or should we instead deprioritize support for such services?

b. Tightly Focusing the Eligible Service List

91. In addition to the specific services identified above, we seek comment on whether we should more fundamentally shift the way we prioritize E-rate support to emphasize and accelerate high-capacity broadband connectivity to and within schools and libraries. In particular, we seek comment on whether we should seek to identify the services currently on the ESL—plus any additional services—that are essential for high-capacity broadband connectivity, and limit the ESL to just those services. What services, in addition to those identified above, should we remove from eligibility under this approach? Would taking this approach help ensure that schools and libraries have the bandwidth necessary to support digital learning?

92. SECA's recent proposal to streamline priority two services is one example of such an approach. SECA recommends that the priority two ESL be “redefined to focus on ensuring that the transmission of bandwidth inside the building is sufficient, and all other functionality should no longer be eligible for support.” It therefore suggests that priority two eligible services should be limited to routers, up to one per building; wireless access points, up to one per classroom for schools; and internal cabling, up to three cabling drops per classroom for schools. We seek comment on SECA's proposal, as well as on variations and alternatives.

c. Transitioning Voice Support to Broadband

93. We also seek comment on phasing out services that are used only for voice communications. At the inception of the E-rate program, one of the primary ways to access the Internet was through voice telephone lines that delivered dial-up service via a 56 kbps modem. Today, widespread deployment of faster-speed technology has permitted schools and libraries to have access to high-capacity broadband connections that permit many types of digital learning technologies. We ask whether focusing on the transport of broadband and transitioning away from voice services would better serve the proposed priorities of the program.

94. In funding year 2011, there were more than 37,000 requests for local and long distance telephone service, amounting to approximately $260 million in funding commitments. While, for funding year 2011, USAC estimates that it committed close to an additional $176 million for cellular services. We seek comments on whether this funding would have greater impact for students and library patrons if it were transitioned to support broadband for schools and libraries.

95. SECA's June 2013 White Paper recommends that telecommunications services that are used only for voice communications should be phased out of E-rate support because such services are not used to provide advanced telecommunications or information services to schools or libraries. It suggests, however, that telecommunications services used for both data and voice telecommunications services should continue to be fully eligible for E-rate without requiring any cost allocation. SECA specifically proposes a tiered phase out of funding for all basic phone service over a five-year period to allow the smaller and more rural applicants who disproportionately use the basic phone service and legacy technologies ample opportunity to upgrade their infrastructure, and for their associated service providers to also update their service offerings. We seek comment on SECA's plan for phasing out E-rate support for basic voice telecommunications. Would the savings resulting from the phase out of funding for basic voice be better spent on high-capacity broadband that supports digital learning? Would the phase out of voice services give more E-rate applicants the opportunity to have internal connections project funded under the program?

96. We ask about the potential hardship schools and libraries would face if voice phone service was phased out under the E-rate program. As we noted in the

E-rate Broadband NPRM,

75 FR 32699, June 9, 2010, we recognize that local, state and Tribal jurisdictions around the country are facing economic difficulties and budget tightening. At the same time, we seek comment on the extent to which E-rate support for voice service serves to provide schools and libraries access to services they would not otherwise be able to afford, or simply subsidizes voice telephone service that schools and libraries would purchase anyway, including voice services schools across the country may have been paying for in full before the inception of the E-rate program.

97. Should the Commission consider subsidizing more cost-effective ways to make local and long-distance calls? Does Voice over Internet Protocol (VoIP) service provide a viable alternative to public-switch telephone service? Has the advent of increased broadband speeds in schools and libraries made VoIP service a more cost-efficient and attractive way to receive voice services? How should our rules accommodate the needs of schools and libraries in areas without VoIP services, including some Tribal lands? Or should the Commission also phase out funding for all voice services, including VoIP service?

98. We seek comment on whether there are any statutory limitations that must be considered in eliminating voice telephone service from the ESL. To the extent there are legal concerns with removal of voice telephony service from the ESL, could we condition support for voice telephony service in a way that would eliminate stand-alone support for voice telephony service but allow it for bundles that include broadband service? Could the Commission forbear from applying the obligation on telecommunications carriers to discount their voice telephony service, thus eliminating the need for such reimbursement?

d. General Issues Related to Phasing out Support

99. In the paragraphs above, we have proposed or sought comment on proposing phasing out funding for several types of services. If we decide to phase out support for these services, should we begin immediately for funding year 2014? Or should we instead phase down such support over a longer period of time to provide more time for applicants? If so, what period of time would be appropriate? Are there some services we should stop supporting immediately, and others we should phase out incrementally over time?

100. Alternatively, should we consider maintaining support for some or all of these services, but at a lower priority than the funding of high-capacity broadband services? Or, as another alternative to phasing out funding for the services described above, should we consider reducing the percentage of support we provide for those services? If so, what percentage of support would be appropriate?

101. Are there other services for which we should phase out support or reduce the percentage of support E-rate provides? We ask commenters to identify any specific services that they think should be supported by the E-rate program, but at a lower discount rate, and what discount rate commenters think we should use. Should the discount be flat for all services, regardless of the applicant or should we adjust all applicant discount rates for such services? Finally, we invite commenters to help us refine USAC's estimates of the amount of E-rate funding spent on each of the services at

issue in this section and elsewhere in this NPRM. Should we consider other changes to the ESL?

102. We seek comment on any other approaches we should consider. For example, because access to high-capacity broadband is far below the national average on Tribal lands, should we consider adopting an E-rate Tribal priority? If so, how should such Tribal priority operate? Should, for example, a Tribal priority be available to schools operated by the Bureau of Indian Education or by individual Tribal governments? Commenters should be as specific as possible.

B. Ensuring Equitable Access to Limited E-Rate Funds

103. To help address high demand for E-rate funding and to ensure equitable access to limited E-rate funds, we seek comment on revisions to the way E-rate funding is currently distributed. As explained in more detail above, under current program rules, eligible applicants must contribute between 10 and 80 percent of the cost of the supported service. The discount available to a particular school is determined by the percentage of student enrollment that is eligible for a free or reduced price lunch under the NSLP or a federally-approved alternative mechanism, such as a survey. A library's discount percentage is based on the discount rate of the public school district in which the library is physically located. Schools and libraries located in rural areas also may receive an additional 5 to 10 percent discount compared to urban areas. The rules provide a matrix, produced above in Figure 1, reflecting both a school's urban or rural status and the percentage of its students eligible for the school lunch program to establish a school's discount rate, ranging from 20 percent to 90 percent, to be applied to eligible services.

104. Below we seek comment on six options for revising the structure for distributing funds under the E-rate program by: (1) revising the discount matrix to increase certain applicants' matching requirements; (2) providing support on a district-wide basis; (3) revising our approach to supporting rural schools and libraries; (4) incorporating a per-student or per-building cap on funding into the discount matrix; (5) providing more equitable access to priority two funding; and (6) allocating funds to all eligible schools and libraries up front. These options are not necessarily exclusive of one another and we encourage interested parties to address comprehensively the various proposals, particularly if aspects of one are in tension with another. We also ask that parties consider the impact of changes to the discount matrix on libraries, and we seek comment on what particular challenges libraries will face if we change the discount matrix.

1. Modifying the Discount Matrix

105. To have sufficient funds to meet applicants' needs for high-capacity broadband and equitably distribute funding across schools and libraries, we seek comment on whether we should gradually increase, over time, the minimum percentage of matching funds that E-rate applicants must provide when seeking support from the E-rate program. We seek comment on whether this would better serve—on a cost benefit basis—our statutory mandate to “ensure affordable access to and use of” E-rate services. We also seek comment on other possible changes to the discount matrix.

106.

Increasing applicants' matching requirement.

Gradually increasing the minimum matching funds provided by applicants would broaden the availability of E-rate support. In funding year 2011, for example, USAC committed approximately $818 million in support for applicants at the 90 percent discount level, and $790 million in support for applicants at 80-89 percent discount levels. Thus, nearly two thirds of all funding went to applicants at these funding levels. Some previous commenters have suggested reducing the maximum discount rate to 80 or even 70 percent. If the maximum discount rate had been 80 percent in funding year 2011, there would have been approximately $150 million in funding to spread more widely to applicants who did not receive support for priority two services.

107. Increasing the matching requirement could also encourage applicants to make more efficient and smarter decisions. In 2003, a USAC task force on the prevention of waste, fraud and abuse found that increasing the percentage of costs that schools and libraries pay for E-rate supported services would encourage more careful and cost-efficient purchasing of E-rate supported services and would thereby reduce the risk of waste, fraud and abuse of E-rate funds. Therefore, it recommended requiring applicants to pay at least 20 percent of the price of priority two E-rate services. We seek comment on that analysis.

108. More recently, Funds for Learning, an E-rate consultant, issued a report demonstrating that school districts with high discount rates spend, on average, far more on E-rate supported services than schools that have to pay a higher percentage of the costs of the supported services they purchase. We seek comment on that analysis and whether it supports a decision to reduce the maximum discount level. Funds for Learning also notes, however, that the majority of high-discount schools are not, in its words, “big spenders.”

109. Recent changes to the Rural Health Care program provide an example of the potential benefits of reducing the maximum discount level. In adopting the

Healthcare Connect Fund Order

last year, the Commission required fund recipients to contribute 35 percent of the costs of the supported services. The Commission found that requiring recipients of Healthcare Connect funds to contribute 35 percent of the costs of services gave health care providers a strong incentive to control the total costs of the supported services and “appropriately balances the objectives of enhancing access to advanced telecommunications and information services with ensuring fiscal responsibility and maximizing the efficiency of the program.”

110. We anticipate several advantages to increasing the matching requirement even if we do so over time. For example, requiring the schools and libraries with the highest discount rate to pay for a greater share of their purchases could help drive down the purchase price for E-rate supported services. Applicants receiving substantial (80-90 percent) discounts have greatly reduced incentives to ensure they are receiving the lowest priced services or that they are getting only services they need. We also seek comment on the other benefits, as well as the drawbacks, to increasing schools' and libraries' minimum matching requirement for E-rate supported services.

111. For any revisions we may ultimately make to the discount an applicant can receive for E-rate supported services, we propose to phase in such changes over some period of time, such as three years. Is this enough of a phase-in to allow applicants to adjust their requests? Does the length of the necessary phase-in depend on the extent of reduction in the maximum discount level? We seek comment on such a phase-in for each of the different suggested revisions noted above.

112.

Other modifications to the discount matrix.

We also seek comment on other potential adjustments to the discount matrix to ensure that we can provide some funding to all eligible schools and libraries for all supported services. Should we, for example, reduce the lowest discount rate from 20 percent to 10 percent? How would that

change affect the ability of schools and libraries with the lowest number of students qualifying for free and reduced lunch to receive affordable high-capacity broadband? Should we reduce the top discount to 85 percent, 75 percent, or 65 percent? If so, should there be a reasonable transition period? Should we consider reducing each discount level by a set percentage, such as five percent or ten percent? We estimate that if all the discount rates were five percent lower in 2011, USAC would have been able to distribute an additional $169 million in priority two funding. We estimate that if all discount rates were ten percent lower, in 2011 USAC would have been able to distribute an additional $338.5 million in priority two funding. Would reducing the discount rate across the board result in a disparate impact on applicants depending on the discount level? What would the impact be if we reduced the number of discount levels? Would such a decision simplify the discount calculation process for applicants? Should we consider combining applicants at similar discount levels into a single discount level? Should we require all applicants eligible for a discount between 75 percent and 85 percent, for example, to apply using only an 80 percent discount? Should we have a flat rate discount, or one flat rate discount for rural schools and libraries and one for all other schools and libraries? Are there other ways to adjust the discounts applicants are eligible for? In order to encourage consortium purchasing, should we have a higher minimum discount rate for consortia applications than for individual school and school district applications?

113. There are other possible ways to modify the matching funds requirement, and we invite commenters to offer other proposals. We also invite commenters to refresh the record on previous proposals. For example, in response to the

E-rate Broadband NPRM,

SECA proposed simplifying the discount matrix by setting applicants' discount rate at the sum of the applicant's NSLP discount percentage plus 20 percent for non-urban areas, and 25 percent for rural areas, up to a maximum discount rate. We invite comments on that proposal, and specifically seek comment on how such a change would affect applicants and the fund. What should the maximum discount rate be? Are there other ways that SECA's proposal should be adjusted?

2. Support Based on District-Wide Eligibility and Application by School District

114. We seek comment on requiring all schools within a school district to submit applications by school district, rather than by individual school or groups of schools within the same discount, and to use the average discount rate for the entire school district rather than the weighted average for each school building. We also seek comment on whether all libraries located within a school district should use the school district's discount rate when calculating their discount rate.

115. Currently, school districts, library systems, or other billed entities are required to calculate discounts for services that are shared by two or more of their schools, libraries, or consortia members by calculating an average discount based on the discounts of all member schools and libraries. School districts, library systems, or other billed entities are required to ensure that, for each year in which an eligible school or library is included in an application for purposes of calculating the aggregate discount rate, that eligible school or library receives a proportionate share of the shared services for which support is sought. For schools, the average discount is the weighted average of the applicable discount of all schools sharing a portion of the shared services, with the weighting based on the number of students in each school. For libraries, the average discount is a simple average of the applicable discounts to which the libraries sharing a portion of the shared services are entitled. Each billed entity-the entity responsible for making payments directly to a service provider—must file a separate FCC Form 471 application to certify their eligibility to receive discounts on eligible services for eligible schools, libraries, and consortia of those entities.

116. In the

E-rate Broadband NPRM,

the Commission sought comment on a proposal to revise the discount rules so that schools would calculate discounts on supported services by using the average discount rate for the entire school district rather than the weighted average for each school building. As the Commission observed in the

E-rate Broadband NPRM,

calculating discounts by individual school adds a significant level of complexity to the application process, because the discounts must be calculated separately by school and checked individually by USAC. Simplifying the discount percentage rate calculation across a school district could streamline the application process for school districts and reduce the administrative burden on USAC by no longer requiring USAC to verify each individual school's discount percentage rate. We also anticipate that applying one discount rate to all eligible schools in a school district could lead to more timely funding commitments from USAC. Additionally, the Commission stated that it could significantly reduce the amount of information necessary for Block 4 of the FCC Form 471 application and eliminate a billed entity's submission of multiple FCC Form 471 applications at different discount levels. Moreover, SECA argues that calculating discounts on a district-wide basis better reflects schools' financial realities: tax bases are calculated on an entire district population, not just those of a subset of schools, and budgets are set district-wide. Allowing libraries located within a school district to use the school district's discount rate would also ease the administrative burden of such libraries.

117. Accordingly, we propose to revise § 54.505(b) of the E-rate rules to read:

School districts shall calculate discounts on supported services described in § 54.502(b) by calculating a single discount percentage rate for the entire school district by dividing the total number of students eligible for the National School Lunch Program within the school district by the total number of students within the school district. This single discount percentage rate shall then be applied to the discount matrix to set a discount rate for the supported services purchased by all schools within the school district.

We seek comment on this proposed rule. We also seek comment on whether we should define “school district” for purposes of this proposal.

118. We also propose below to change our definition of “rural” for purposes of the E-rate program to ensure greater funding to truly rural areas by using the U.S. Department of Education's NCES definitions. Currently, the definition of “rural area” is the same used by the U.S. Department of Health and Human Service's Office of Rural Health Care Policy (ORHP). Are there any school districts for which some schools would be differently classified as “rural” or not under our current or proposed definition? If so, we seek comment on whether to apply the rural discount if any schools in a district are considered to be located in a “rural” area or if a majority of the schools in a district are considered rural. Alternatively, should we consider partial rural discounts depending on the proportion of schools

that are rural, or other approaches? We recognize that there may be specific instances where adopting a district-wide discount rate may result in a lower discount for certain entities. We therefore seek comment on the impact of this proposal on schools and libraries.

119. Additionally, in the

E-rate Broadband NPRM,

as part of its efforts to streamline the application process, the Commission sought comment on a proposal to require all schools and libraries that are part of the same school district to submit applications for priority two internal connections by school district, rather than by individual school. As the Commission stated in the

E-rate Broadband NPRM,

requiring schools to apply by school district would help streamline the process and simplify the discount calculation for schools as well as the review process for both applicants and USAC. Additionally, it would ensure that libraries receive funding for internal connections and at the same discount level as schools located within their school district. We thus seek comment on amending § 54.504(a) of the E-rate rules to read:

An eligible school, library, or consortium that includes an eligible school or library seeking to receive discounts for eligible services under this subpart, shall, upon signing a contract for eligible services, submit a completed FCC Form 471 to the Administrator. All schools and libraries that are part of the same school district and seek priority two internal connections shall submit a completed FCC Form 471 to the Administrator as part of the school district in which they are located. A commitment of support is contingent upon the filing of an FCC Form 471

.

We seek comment on this proposed rule.

120. We also seek comment on whether we should require schools and libraries to submit applications for priority one services by school district. Commenters should address what, if any, additional burden such proposal may place on applicants. In addition, we seek comment on whether to limit applications for a school district to one for each category of service requested. For example, if the Commission retains the current priority one and priority two distinctions, an applicant could only submit two applications—one for each category. What are the advantages and disadvantages of such a requirement?

3. More Equitable Funding for Rural Schools and Libraries

121. In order to ensure more equitable access to E-rate funding, we seek comment on whether we should further increase the discount rate or the amount of E-rate funds available for schools and libraries in rural areas or in remote rural areas. When the Commission created the E-rate program, it recognized that schools and libraries in rural areas would likely face higher costs for E-rate supported services, and therefore provided an additional 5-10 percent discount rate for rural schools and libraries that would otherwise receive a discount rate of 60 percent or less. E-rate has been crucial in supporting connectivity to rural schools and libraries. However, those schools and libraries in rural areas that also have a high percentage of students that qualify for free or reduced-price school lunches do not get an additional discount, even though there costs may be higher. We therefore seek comment on whether all rural schools and libraries, or those in remote-rural areas should receive additional E-rate support to recognize the unique challenges of providing services in rural, less dense areas.

122. Conversely, some commenters argue that the Commission should adjust the discount matrix so that E-rate applicants with similar levels of participation in the national school lunch program receive the same discount percentage, regardless of the location. Given that most E-rate funding goes to schools and libraries that receive discount rates above 60 percent, and therefore the majority of E-rate funds USAC commits are not subject to the discount, is there value in simplifying how discount levels are established for all schools and libraries, as these commenters suggest? Should our approach differ for priority one and priority two services?

4. Setting Budgets or Limits

123. In this section, we seek comment on whether we should impose a per-student or per-building budget, or similar limits, on funding for schools and libraries. Building on a recommendation of the 2003 USAC Task Force, Funds for Learning, an E-rate consultant that has analyzed USAC's data, has argued that appropriately-structured budgets on a per-student or per-building basis could lead to more equitable and predictable distribution of E-rate funds by limiting the funding that is allocated to a small number of high-spending applicants. According to Funds for Learning, 2012 funding requests averaged $44.30 per-student for priority one services across all applicants, but more than 10 percent of applicants sought funding of at least $180 per-student for priority one services. Notably, four school districts in the nation's largest cities requested at least $240 per-student, and more than a dozen other applicants sought over $1,000 per student in total support in funding year 2012.

124. Some variation in funding is not surprising because discount rates range from 90 percent to 20 percent. Moreover, the Commission has always recognized that schools and libraries across the country would have different needs and different challenges in purchasing E-rate supported services. Yet the Funds for Learning analysis of funding year 2013 requests shows that applicants with higher discount rates also planned to spend significantly more per-student in pre-discount dollars for telecommunications and Internet access (priority one services). Those seeking 20-59 percent discounts plan $35.23 per-student in pre-discount purchases of priority one services, while those seeking 60-79 percent discounts plan $43.02 per-student pre-discount purchases for such services, and those seeking 80-90 percent discounts, $86.53 per-student pre-discount purchases for such services. We also expect that a small rural school may have to pay more per-student for Internet access than a large urban school. However, Funds for Learning finds that some of the highest per-student costs are in urban areas, where competition should drive down prices. While the 2,360 applicants in large cities plan an average of $67.88 per-student in pre-discount purchases for priority one services for funding year 2013, the 4,987 applicants in large, medium, and small-size suburban schools plan per-student purchases of priority one services averaging only $40.76, $39.17, and $46.44 in pre-discount prices, respectively. Even the 3,129 applicants in “rural: distant” areas planned pre-discount purchases averaging only $65.35 per-student.

125. In the

E-rate Broadband NPRM,

the Commission proposed a per-student cap on annual priority two spending for schools of $15 per-student per year. A $15 per-student cap would have limited the most disadvantaged schools to 90 percent of $15 in support, or $13.50 per-student per year. Notably, this amount is less than half the average per student funding amount for priority two funding over the past five years. Commenters argued that the proposed cap failed to account for a number of factors that could affect applicants' needs.

126. Having considered the record on that proposal, we now seek comment on whether we should consider a higher and more flexible per-student limit, per-building limit or alternative forms of limits or budget on an applicant's E-rate funding. If we adopt a per-student limit or other form of limit for some or all

services, we seek comment on where we might set the limit. Should any limits we adopt include adjustments to reflect the higher costs faced by applicants in more expensive-to-serve locations, such as Tribal lands? Should any such adjustment be based on observed current costs, some relatively simple and reliable proxies for costs, or some other measure? Should limits be set relatively high, so as to serve as a check on excessive funding requests and help prevent a few applicants from securing so much funding that other disadvantaged applicants are crowded out, while leaving most applicants unaffected? Alternatively, should limits be set lower to more aggressively spread funding annually to disadvantaged applicants that have rarely, if ever, received funding for internal connections?

127. We invite commenters to propose limits for either total annual funding, pre-discount requests, or for priority one and priority two purchases separately and ask commenters to explain their rationale for the limits that they recommend. We seek particular comment on Funds for Learning's most recent proposal calling for a per-student budget calculation. We note that we have sought comment on prioritizing broadband connectivity to and within schools and libraries, which could, among other changes, raise the per student cost of supported services for those schools and libraries seeking support for large installation and construction costs. How do we implement this prioritization of broadband connectivity while also instituting any of the potential funding limits? Should we consider excluding some costs from the limit, such as non-recurring installation and construction costs? Should we instead impose some other cap on costs related to the higher priority services?

128. We realize that anything but a very high per-student limit could prevent the smallest schools and particularly those in remote areas of the country, such as schools on Tribal lands, from affording supported services. Is this an argument for using per-building caps for certain types of services instead? As we did in the

E-rate Broadband NPRM,

we also seek comment on whether there should be a minimum amount of E-rate support for which a school, library, or school district is eligible, irrespective of the number of students, and what it should be. If a minimum amount is established, how should we compute that minimum? Should we provide for different limits depending on the number of students at a school or in a school district? If so, what should those limits be? We also repeat our question about whether any limit should permit additional funding for rural applicants, either by establishing a higher limit for rural applicants or through some other mechanism.

129. We also seek comment on how to set caps for libraries if we were to take either approach above for schools. The

E-rate Broadband NPRM

suggested that library demand might be capped at the level of the public school district in which they were located, but it also noted that it might be advisable to modify that approach. We seek comment on the best way to set caps on E-rate support for libraries, whether based on the cap for the closest public school district, the size of their patron population, or some other figure or figures.

130. We are also particularly interested in any examples that commenters can offer of other funding programs in the United States or elsewhere that have used analogous per-customer caps effectively in other settings, for us to learn what might work best. We also welcome comments pointing us to examples of problems with funding caps that have arisen in other programs.

5. More Equitable Access to Funding for Internal Broadband Connections

131. As described above, internal connections are needed to make effective use of high-capacity connectivity to schools. High bandwidth connectivity to a school or library serves little purpose if students and patrons inside are not able to use it effectively because internal wired and wireless connections are missing or insufficient. Yet today, few schools are able to receive support for internal connections. Indeed some commenters have argued that lack of internal connections funding—due to increasing restrictions on the availability of priority two support—have become a barrier to adoption of higher speed connections for many schools and libraries. In this section we seek comment on how to increase access to funding for internal connections.

132. In order to provide more equitable access to priority two funding, in 2003 the Commission adopted a rule limiting each eligible entity's discounts receipt of discounts on internal connections to twice every five funding years (commonly referred to as the two-in-five rule). However, because requests for priority two funding exceed the E-rate funding cap, there is wide-spread agreement that a relatively small number of applicants, those that qualify for the highest discount rates, receive priority two funding over and over again, while other applicants seldom qualify for priority two funding. Therefore, we seek comment on whether we should revise or rescind the two-in-five rule, and if so, what we should replace it with.

133. SECA recently suggested that the Commission rescind the two-in-five rule. Instead of using the two-in-five rule, SECA suggested that the Commission allow all applicants to receive funding on a rolling funding cycle. Under SECA's proposal, a different set of applicants would be eligible for priority two funding every year, until all applicants have been eligible for some priority two funding and then the cycle would start again. The benefit to the SECA approach is that it ensures all E-rate applicants have access to some priority two funding over time. If we continue to prioritize funding for some services over others, we seek comment on the approach offered by SECA.

134.

Eliminating the distinction between priority one and priority two.

Other commenters appear to support replacing the current prioritization system with a “whole networks” approach, under which connectivity to schools and internal connections are funded together and all eligible services are given equal priority. Commenters argue that this approach would give schools the flexibility to focus E-rate funding on those portions of their network where upgrades are most needed—whether connection to the schools or internal connections. It could also eliminate incentives for vendors to re-characterize priority two services as priority one, or for schools to purchase more expensive priority one services—like cellular data connections- in lieu of cheaper priority two services, like internal wireless connections.

135. We therefore seek comment on whether we should more fundamentally shift the way we prioritize E-rate support by eliminating the distinction between priority one and priority two services. Under this approach we would instead allow schools and libraries to choose from one consolidated menu of services. Would this approach allow more schools access to funding for internal connections? Would this additional flexibility be beneficial? If we instituted this proposal, how should we determine the amount of support that each school or library receives? And if we took such an approach, how would we prioritize among funding requests to the extent they exceeded the funding cap? Would such an approach necessarily require a per-student or per-

building limit, or other form of budget for individual applicants, as discussed above?

136. Are there other changes we should make to the prioritization of services? For example, instead of consolidating the two existing priority levels should we create more priority levels than currently exist? If so, what should be in the various categories and how should we transition services between the current priority levels and any new ones? Are there any other approaches we should consider?

6. Simplified Allocation of Funds to All Schools and Libraries

137. In this section, we seek comment on a more fundamental approach to changing the distribution of E-rate funding. Under this approach, we would eliminate the discount matrix and the priority system; instead, each eligible applicant would receive a fixed budget at the beginning of the funding year to spend on any eligible services of their choosing. In contrast to the existing system, whether or not a school or library receives funding would be determined at the beginning of the funding year; thus applicants could know the amount of funding available before committing to any particular project. We seek comment on this approach. We seek comment on the costs and benefits of this approach, how this approach would impact other proposals we have discussed herein, and whether it would further our proposed goals.

138. If we adopted the simplified-allocation approach, we seek comment on how we should allocate such funds among eligible applicants. One method of allocating funding to schools would be to allocate funds to each school (or school district) on a per-student basis. Rural schools facing higher costs and schools serving low-income areas or student populations would receive additional funding for each student. Thus, a school serving a rural area might receive twice as much per student as a school serving an urban area, or a school located in an area with high poverty might receive twice as much per student.

139. If we were to adopt a per-student allocation system, how much additional funding per student should rural schools receive? How much additional funding for schools serving low-income populations? Should these determinations be done on a bright-line basis (

e.g.,

areas with poverty rates of more than 15 percent be classified “low-income” and those with less than 15 percent poverty “high-income”) or should we use a sliding scale (such as adjusting funding based on median household income, poverty rate, or some similar metric)? Should there be additional allocations for schools in remote areas (such as schools in the northern villages of Alaska)? If so, what criteria should we use for determining which schools should be eligible for additional allocations? Should there be a minimum funding level (a floor) or a baseline funding amount for all schools? We also ask that commenters explain how this approach and any modifications they offer would affect schools' and libraries' ability to purchase the E-rate supported services they currently receive, those they receive no discount for today under the priority system, and those they are likely to need in the future in order to meet our proposed goals for the E-rate program.

140. Under this system, how should the Commission allocate funds among libraries? For example, could we look at the number of patrons served by a library or the population it serves? Should we adjust the funding for libraries based on whether they are located in a rural or extremely remote area? Should we adjust the funding to reflect the wealth of the surrounding population? How do libraries determine the area they serve, and how could we adjust the allocation methodology to reflect the unique needs of libraries? Should we consider a per-building funding amount for libraries? We also ask commenters to explain the impact of this approach, and of any modifications they offer, to libraries' ability to meet their connectivity needs.

141. We also seek comment on how to allocate funding between schools and libraries. For example, should we look at the past allocation of distributed funds and reserve a similar proportion of the Fund for each group separately? Would allocating 90 percent of E-rate funding each year to schools and ten percent to libraries be a fair appraisal of historical spending patterns (or future spending needs)?

142. We also seek comment on how the simplified-allocation approach might impact group applicants, including school districts and consortia. For example, under this approach, should school districts be required to report the number of students at each school or could the school district simply report the total number of students in the district? If the latter, how should we calculate the per-student allocation, on a school-by-school basis or using some district-wide averaging? How do we ensure that all schools in a district or a consortia benefit from E-rate support? Would the fact that vendors know the budget of each school, school district, or consortium impact the ability of districts and consortia to drive down prices by aggregating demand?

143. In turn, how might this proposal impact consortia? Today, funding for priority two services is determined in part by the student-weighted average discount-level of consortium applicants. Does that system impact priority two requests, given that a lower discount might prevent a consortium from receiving any funding at all? Under the simplified-allocation approach, each school or library in a consortium could know up front the number of E-rate dollars it can bring to the table, and each consortium could prioritize its spending as it sees fit. Would that knowledge aid or inhibit the formation of consortia?

144. If we adopted the simplified-allocation approach, what sort of matching requirements should we include to ensure that applicants spend E-rate funds prudently? As discussed above, just last year the Commission found that requiring recipients of Healthcare Connect funds to contribute 35 percent of the costs of services gave applicants a strong incentive to control the total costs of the supported services and “appropriately balances the objections of enhancing access to advanced telecommunications and information services with ensuring fiscal responsibility and maximizing the efficiency of the program.” Could a lower matching funds requirement, such as requiring E-rate applicants to pay one dollar for every three E-rate dollars they receive, serve the same purposes for schools and libraries that depend on the E-rate program? Would such a requirement deter wasteful spending? Would a flat 25 percent matching requirement give applicants sufficient incentive to control the costs of supported services? Would the fact that they have a specific budget encourage some applicants to spend more money than they might otherwise, or would a specific budget aid schools in long-term planning and prudent spending? How would a flat 25 percent matching requirement impact schools' and libraries' ability to afford high-capacity broadband given that current contribution requirements range from 10 percent to 80 percent? Would it impose a hardship on certain schools, such as schools with few resources and facing extreme costs? If so, should there be an alternative matching requirement for such schools and under what circumstances?

145. We seek comment on the relative fairness to recipients of this approach

versus the current system or other options we seek comment on in this Notice. We seek comment on whether, under this approach, recipients would benefit from a more stable, and predictable level of support from year to year. Would such stability aid in long-term planning? We also seek comment on whether there are ways to implement this approach that would ensure that poor, rural schools and libraries that do not currently have access to high-capacity services get them.

146. Would the simplified-allocation proposal give local schools and libraries additional flexibility to meet their diverse needs, allowing some to prioritize higher-capacity circuits and others to prioritize connecting classrooms or deploying Wi-Fi? For example, could we retain support for basic maintenance and other services since funding availability will no longer depend on the specific services ordered by other schools and libraries?

147. One of the proposed goals is streamlining the administration of the E-rate program. We seek comment on whether adopting the simplified-allocation approach would further that goal or hinder it. For example, could we consider eliminating all or portions of our competitive bidding rules, and if so which ones? Under this approach, would schools and libraries' incentives to watch over their E-rate funds increase sufficiently to allow us to eliminate the 28-day waiting period? Should we eliminate the price as the primary factor requirement for competitive bidding? If we eliminate some or all of our competitive bidding requirements, should we continue to require applicants to conduct fair and open competitive bidding processes? How should we and USAC determine whether applicants' processes have been conducted in an open and fair competitive manner? How can we best protect against waste, fraud and abuse under the simplified-allocation approach?

148. We also seek comment on other administrative issues under the alternative funding approach. Should we eliminate FCC Forms 470 and 471 and replace them with a single-page form that requires the school or library to identify contact information, certify compliance with federal rules, and certify the number of students/patrons served? Would that initial application need to be filed several months before the start of the funding year (as FCC Forms 470 and 471 are today), or could the initial application be filed after the funding year begins? Could we eliminate the requirement that applicants for internal connections funding file technology plans? Could USAC bear a greater part of the burden of calculating funding amounts for applicants to simplify the process for them? If so, after that initial application, USAC could provide the school with the total amount of funding available in a commitment letter and the school would have the flexibility to spend that funding on any eligible service. Are there other forms, deadlines, or requirements, such as the technology plan and technology-plan-review process, that we could eliminate? To actually receive money, could a school submit invoices or other proof that it has paid and received particular services? Would this approach reduce the time between funding commitments and disbursements? Why or why not, and by how much?

149. What sort of reporting requirements would work best under this proposal? How can we best ascertain that applicants actually purchased supported services and that they are being properly used? Should we, for example, require a school district superintendent or school principal to certify under oath that all supported services are being used to benefit students. Would such a certification make sense at the beginning of the E-rate funding process (such as on FCC Form 471) or at its end (such as on FCC Form 486)? Should libraries be subject to a similar certification requirement? For example, should libraries be required to certify that E-rate funds are being used to benefit their patrons? Would the head librarian be the appropriate representative for such a certification?

150. If we adopted this approach, how could we phase it in over time to give applicants time to adjust? Or would this approach require sufficiently fundamental changes in the program that a flash cut would be required?

C. Lowering New Build Costs and Identifying Additional Funding To Support Broadband to Schools and Libraries

151. In this section, we seek comment on what additional steps the Commission should take to ensure that there are sufficient funds to meet the connectivity needs of students, teaching staff, and libraries.

152.

Public-private partnerships.

Are there steps the Commission could take to improve the private sector business case for deploying fiber to schools and libraries, or otherwise expanding connectivity, and thereby reduce the need for E-rate funding? For example, are there steps the Commission could take to facilitate use of new fiber runs for multiple business objectives, such as backhaul for cell towers or service to other enterprise users, and thereby incent greater sharing of new construction costs? Could waiving, forbearing from, or reducing certain otherwise-applicable requirements in conjunction with new infrastructure builds to schools and libraries help lower costs and therefore extend the reach of E-rate funding? Should the Commission condition certain forms of E-rate funding on changes in local permitting practices or other state and local policy changes (

e.g.,

state and local dig-once initiatives) to help reduce new build costs? What impact would such a policy have on schools and libraries on federal or other trust lands, such as Tribal lands? How can the Commission best coordinate with and support state, local, and Tribal government efforts to increase broadband access to schools and libraries? Are there other Commission rule changes that would facilitate coordination or support state and local efforts?

153. We also seek comment on other potential public or private sources of funding and how the Commission could help encourage the deployment of such funding to meet school and library needs. For example, in addition to the possible changes to the discount matrix discussed above, could the Commission make certain types of E-rate support, or E-rate support above certain amounts, conditional on state, local, Tribal, or private funds above the otherwise-required school or library 10-80 percent contribution? Would a larger emphasis on matching funds help recruit additional funding from state, local, or private-sector sources? Would it disproportionately benefit schools with greater means or higher-income student populations? What impact would such an approach have on schools and libraries located on Tribal lands? Should schools and libraries operated by the Bureau of Indian Affairs or individual Tribal governments be exempt from such a requirement?

154. Are there other steps the Commission could take to encourage public-private partnerships to promote our proposed E-rate goals? For example, Verizon suggests that its Verizon Foundation Innovative Learning Schools program, which focuses on teacher training and professional development for select schools nationwide, complements E-rate but sometimes faces challenges with respect to E-rate gift rules. We seek comment on whether there are ways that E-rate could allow schools and libraries to take greater advantage of private philanthropy while still allowing the

Commission to maintain appropriate control over E-rate expenditures and to prevent improper influence over E-rate service provider selections.

155.

Coordination with other universal service programs.

We also seek comment on whether greater coordination of E-rate funding with funding from other universal service programs could multiply the impact of these other programs to support the goals of E-rate. In the

USF/ICC Transformation Order,

76 FR 78384, December 16, 2011, the Commission adopted broadband service obligations for eligible telecommunications carriers (ETCs) that receive high-cost support. The Commission noted that it expected ETCs to engage with community anchor institutions, which include schools and libraries, in the network planning stages with respect to the deployment of Connect America-supported networks. Both price cap and rate-of-return ETCs that receive high-cost support are already required to include in their annual reports the number, names and addresses of community anchor institutions to which the ETC newly began providing access to broadband service in the preceding calendar year.

156. We seek comment on how to minimize any overlap in funding for broadband, while extending the reach of both programs to support the deployment and adoption of broadband by E-rate applicants? How can we best ensure and encourage the two support mechanisms to achieve our universal service objectives, including the goals identified herein? For example, should we consider what portion of deployment should high-cost funding support and what portion should E-rate support? Would it be useful to specify that certain costs—such as construction charges to extend fiber to the school or library property line—are funded by high cost, and other costs—such as recurring charges for broadband service—are funded by E-rate? What measures should we adopt to ensure that there is no duplicative funding of the same facilities or services from the two programs?

157. The Commission has concluded that a forward-looking wireline cost model will be used to determine support to be offered to price cap carriers. After the model is finalized and adopted for Phase II purposes, should we consider how it might be used or modified to assist in determining the cost of providing fiber-based broadband to the E-rate applicants in the relevant geographic area? Could we use a model-derived cost to establish a benchmark for the prices an E-rate applicant should pay for broadband? Should we instead consider a model-derived cost—with the relevant E-rate discount applied—as a cap on the amount the E-rate program will fund for such broadband?

158. We also ask for comment on how we can maintain the core requirements and procedures in the E-rate program if we closely coordinate support with other universal service programs. How could we implement some of these ideas while maintaining the framework of the existing competitive bidding requirements for the E-rate program?

159. In the

Healthcare Connect Fund Order,

the Commission allowed an exemption from the rural health care competitive bidding obligations for health care providers entering into a consortium with E-rate participants. Should we consider a similar accommodation for applicants to the E-rate program?

160.

Funding the proposed goals through E-rate.

In this Notice, we seek comment on various approaches to refocusing or reprioritizing funds, or adjusting the support levels for certain services, as well as other proposals that will reduce costs while better targeting support to help schools and libraries get the connectivity they need. We seek comment on whether, in concert with these changes, enough funding will be saved or preserved to enable the E-rate program to meet our proposed connectivity goals within the existing E-rate funding cap. Recent reforms to the other USF programs were achieved without having to increase the overall size of the USF. For example, the Commission established a budget for the Connect America Fund and a savings target for the Lifeline program. Also, the Commission recently reformed the Rural Health Care program to encourage consortium applications, increase eligibility in covered services and provide applicants more flexibility in renewing multi-year contracts. We ask commenters to identify the funding that could become available as a result of the reforms suggested in this NPRM and whether these reforms will result in sufficient cost savings to the E-rate program to meet our proposed program goals.

161. Alternatively, we seek comment on whether a temporary increase in the E-rate cap is necessary to reach our goals and ensure high-capacity broadband connectivity to and within schools? If we were to authorize such a temporary increase, should we modify our rules to focus the temporary funds on providing services related solely on high-capacity broadband connectivity? What services should be eligible for support under such a short-term program? How much short-term funding would be needed to connect all or virtually all schools to infrastructure or other connectivity sufficient to meet their needs? How much short term funding, and over what period of time, would be needed to provide robust internal connections sufficient to take advantage of the high-capacity broadband connectivity to schools and libraries? Should any such funding be allocated using the generally applicable discount matrix, application process, timeline, and other rules, or should we consider modifications, for example to accelerate availability of funding for upgrades? If we consider a temporary increase in E-rate funding to upgrade school and library connections for digital learning, should we limit participation to only some category of applicants, such as only regional consortia?

162. Should we instead consider a more permanent change to the cap to achieve the goals of a modern E-rate program? When the Commission adopted the $2.25 billion cap 16 years ago, it recognized that it was a best efforts attempt to estimate what the demand would be for telecommunications and Internet access services by schools and libraries. Commenters advocating an increase in the cap emphasize that every funding year applicants have requested more than is available in E-rate support. They further argue that because of the effects of inflation and the growth in the number of students in our nation's schools, the actual purchasing power of the E-rate program declined by nearly one third from the start of the program in 1998 to today. We seek comment on these arguments.

163. Also, under either a temporary, long-term or permanent approach to providing additional funding, would it make sense to initially provide funding to a small group of schools and libraries on a competitive basis with the goal of developing best practices and cost-effective approaches to building out high-capacity broadband services? Are there other ways to use competitive approaches to maximize the impact of funding?

164. We also seek comment on the appropriate role for the Federal-State Joint Board on Universal Service in providing the Commission with advice and guidance on any temporary, long-term or permanent approach to providing additional funding for the E-rate program. For example, if we consider any increase in E-rate funding, should we first seek the opinion of the Joint Board regarding the necessity and the amount of the increase?

IV. Maximizing the Cost Effectiveness of E-Rate Funds

A. Increasing Consortium Purchasing

165. In the

Universal Service First Report and Order,

62 FR 32862, June 17, 1997, the Commission envisioned that allowing schools and libraries to participate in consortia would aggregate demand to influence existing carriers to lower their prices and promote efficient use of shared facilities. The Commission expected that consortia would be particularly important in rural regions to negotiate lower rates as well as secure efficiencies. Today, there are more than 400 consortia, representing more than 9,400 schools and libraries (which include schools in more than 800 school districts), participating in the E-rate program. Every state in the nation has at least one consortium and many states have multiple consortia.

166. At the same time, in funding year 2011, consortium purchasing accounted for only about $300 million of E-rate funds committed by USAC, or about 13 percent of all E-rate funds disbursed. In the recent

Healthcare Connect Fund Order

the Commission found that bulk purchasing by consortia helped drive down service rates, increase bandwidth, improve service quality and reduce administrative overhead. We therefore seek comment on whether we should adopt additional incentives or mechanisms to facilitate the use of consortium purchasing in the E-rate program. In particular, we are interested in ways that consortium purchasing can drive down prices and otherwise benefit applicants and the E-rate fund.

167. We also seek comment on whether there are legal, geographic or other barriers preventing certain schools and libraries from taking advantage of consortium purchasing. Are there ways in which our rules prevent or discourage participation by applicants who might otherwise join a consortium? We invite commenters to identify specific amendments we can make to our rules to ensure that applicants can join or form consortia.

168. Are there other actions the Commission can take to remove barriers to participation in consortia? We recognize that not all applicants choose to join a consortium and we therefore ask about the factors that contribute to an applicant's decision to join or not to join a consortium. In particular, we seek comment from applicants on how they weigh the administrative benefits of joining a consortium in the E-rate program against the burdens the program imposes today. We seek comment on whether there are consortia-friendly application processes that would minimize the administrative burden on applicants and USAC. Should we, for example, prioritize consortium applications in the USAC review process? Should we allow for prioritization for all consortia or only those that, for example, include the neediest schools and libraries? In what ways should we streamline the consortia review process? What steps should we take to avoid disadvantaging schools and libraries unable to participate in consortia, such as some schools and libraries on Tribal lands?

169. We also seek comment on whether particular types of services lend themselves better to consortium purchasing. For example, we note that while schools and libraries might join consortia for broadband access, they might apply independently for internal connections. In particular, we seek comment on whether consortia are effective vehicles for driving down specific costs, such as equipment purchases or broadband access.

170. We seek comment on whether our consortium procedures have different impacts depending on the composition of the consortia. For example, are there disparate impacts between consortia that include only schools, or only libraries, or both schools and libraries? Is the formation of consortia impacted by potential disparities in discount levels? Are consortia that include other entities such as health care providers and/or public sector entities such as state colleges and universities, educational broadcasters, counties, and municipalities impacted in different ways? While we seek comment on these consortia configurations, we also open the inquiry to whether there are other entities that join with schools and/or libraries to create consortia and whether there are specific impacts on those consortia. Given the potential efficiencies of broadband networks that serve multiple types of anchor institutions, are there steps we can take to facilitate the formation of consortia that extend beyond schools and libraries?

171. Finally, while we are eager for schools and libraries to secure the many benefits that consortia can provide, we are mindful that aggregation of applicants can also diminish competition. We seek comment on whether service providers who would compete to serve some of the entities in a consortium might not bid if they could not serve the entire consortium. As a result, a larger consortium could leave a single bidder facing little pressure to pass on any reduced costs to applicants. We seek comment on what the Commission might do while encouraging cost-saving consortia so as to minimize, if not avoid, negative effects on competition.

B. Encouraging Other Types of Bulk Buying Opportunities

172. We seek comment on how best to encourage other types of bulk buying of E-rate supported services. Currently, consortia are one of many ways that E-rate applicants aggregate demand for E-rate supported services in order to reduce prices and procure necessary services. In some cases, E-rate applicants purchase from state master contracts, which offer prices, terms and conditions negotiated by a state on behalf of a wide range of public institutions within that state. In many places, state or regional research and education networks (R&E networks) are also available and offer bulk purchasing opportunities for applicants. In other cases, E-rate applicants may be able to take advantage of regional contracts managed by public, non-profit or private entities that also aggregate demand and manage the procurement process. Should applicants be required to purchase from these state master or regional contracts in which they may participate, unless they can receive the same services for a lower price? We seek comment on the benefits and burdens of these and any other methods that E-rate applicants currently use to aggregate demand for E-rate supported services and request that commenters provide data on how effective such approaches are for driving down prices and creating administrative efficiencies for E-rate applicants. We also invite applicants to identify and comment on other methods of bulk buying that exist outside the E-rate program and whether such methods could be successfully adapted to the E-rate program.

173. We also seek comment on whether the Commission, working with USAC or some other entity, should create a formal bulk buying program for E-rate supported services. If so, are there specific products or services that such a program should cover? For example, are there certain products, like wireless routers, that are standard or common to school and library networks nationwide? Generally, how would such an initiative work within the structure of the current E-rate program? How would such a program appeal to applicants?

174. If we adopt a bulk buying program, should we amend our rules so that purchases made using the program would be exempt from our competitive bidding requirements? Would we incentivize participation by preempting

all or some of the USAC review processes for applicants who purchase through the bulk buying program? How should we treat applicants who purchase products and services that are available through the bulk buying program, outside of the bulk buying program? Should we, for example, treat the prices available through such a bulk-buying as the maximum price for which an applicant can seek support?

175. On the other hand, are there benefits to consortium membership or independent purchasing that could be lost if we were to encourage alternative bulk-purchasing arrangements? By suggesting one bulk buying option, we do not intend to foreclose others, and seek comment on other options.

176. We also seek comment on whether E-rate applicants can lower costs by aggregating data traffic. As we noted earlier, many schools and libraries use district-wide or regional WANs to provide broadband connectivity between buildings. Similarly, state R&E networks can provide high capacity routes from major locations within a state, relying on national networks for long-distance connections and local connections to reach smaller communities and buildings within a community. By partnering with WANs or R&E networks and aggregating Internet traffic, schools and libraries may be able to further drive down prices. E-rate applicants may also work with WANs and R&E networks to purchase circuits and network equipment in bulk and to take advantage of knowledge and relationships with commercial service providers. We seek comment on policies that we can adopt to encourage E-rate applicants to leverage these other networks to lower prices.

C. Increasing Transparency

177. We also propose to increase the transparency of E-rate spending and specifically the prices E-rate applicants pay for service. Increasing such transparency may aid oversight of the E-rate program and drive down the prices of E-rate supported services. We seek comment on directing USAC to publish more granular information about E-rate spending and on how to collect such information. We seek comment on whether increasing price transparency will result in schools and libraries paying less for E-rate supported services and on ways we can assist in making prices for E-rate supported services more transparent. More specifically, we propose options for informing schools and libraries about the prices at which service providers are willing to offer for E-rate supported services. We seek comment on the options we propose and invite commenters to offer other suggestions.

178.

Transparency of E-rate spending.

We seek ways to increase transparency with respect to how E-rate funds are allocated and spent. The National Broadband Plan, for example, recommended that we “collect and publish more specific, quantifiable and standardized data about applicants' use of E-rate funds.” We accordingly seek comment on whether USAC should be required to create a Web site where any American could easily look up the details of how any participant in the E-rate program had used its funds in any given year. How should such information be organized? At what level of detail should it be reported? Would such a Web site provide valuable information to parents? Would it encourage officials to spend money more wisely? How else can we increase the transparency of E-rate spending, including the access that local journalists, school boards, librarians, city governments, and parents have on how E-rate funds are allocated and on what they are spent?

179. Below we seek comment on ways to streamline the E-rate application process. In line with that discussion, how can we minimize the reporting burden on schools and libraries while maximizing the insight the American public has into the spending of E-rate funds? For example, schools report certain characteristics such as the number of classrooms connected on the current Form 471, but that information must be reported before a school has completed a project and before a school has even received a commitment of funding. Could we reduce this burden by instead requiring the disclosure of relevant information (such as capacity leased or wireless access points purchased) on the back-end as part of the invoicing/payment validation process (perhaps as part of Form 486)? Should we require such reporting in a standard format or allow or encourage a fuller description? In short, can we simultaneously increase the transparency of E-rate spending while reducing the burden on applicants?

180.

Transparency of prices available for E-rate supported services.

We seek comment on how best to increase the transparency of prices for E-rate supported services. Are there publicly available online forums, blogs or other media, where schools and libraries can share information about the best prices and deals for E-rate eligible services? If not, or if currently available information is insufficient, we seek comment on what role, if any, the Commission or USAC should have in operating, hosting or endorsing Web sites or other ways of encouraging service providers to share pricing information with E-rate applicants, and facilitate price comparisons. We invite commenters who have experience with other information exchanges to comment on examples of what does or does not work in other contexts, and whether there are models we should look to in unrelated markets or other countries.

181.

Transparency of prices being bid for E-rate supported services.

Our competitive bidding rules require applicants to publicly seek bids for E-rate supported services, but our rules do not require applicants or service providers to make the responses to those bids public. Should we consider making bid responses public or at least accessible to other E-rate applicants? Would it be advisable to release this information only after the applicant has selected a vendor for the requested services? Are there any state laws, court orders, or contracts expressly prohibiting such disclosure? If we do require public disclosure of bid responses, what is the best format and timing for making such responses public in order to maximize the usefulness of such information to other E-rate applicants? To what extent would publicizing such bids drive down prices, both with respect to specific applications and more generally? On the other hand, is there a risk that public bid responses inflate bid prices for E-rate supported services by, among other things, discouraging providers from bidding to provide E-rate supported services? Could such disclosure facilitate tacit collusion to restrict competition through coordinated pricing, market allocation or other approaches that would inflate the price or reduce the quality of E-rate supported services? We also seek comment on the degree to which state, local, and Tribal laws currently require the disclosure of bid responses for E-rate supported services, and whether service providers can and do limit any such public access.

182.

Transparency of actual purchase prices.

As an alternative to requiring public disclosure of all bids to provide E-rate services, we seek comment on making available the prices applicants are paying for E-rate supported services. We note that applicants currently provide that information to USAC. We seek comment on whether we should direct USAC to permit public access to FCC Form 471, Item 21 information or any other information provided by either applicants or service providers participating in the E-rate program. Are there any state laws, court orders, or

contracts that would prohibit such public disclosure? Should we limit disclosure of pricing information to other E-rate applicants? We also seek comment on whether requiring public disclosure of the prices applicants actually pay for E-rate supported services create a more effective competitive marketplace for those services and products, or might service providers eschew participation to shield their prices from public view. Could such disclosure facilitate tacit price fixing, bid rigging or market allocation schemes, thus inflating the price of E-rate supported services? In the alternative, do commenters believe that publicly displaying prices may encourage more service providers to approach individual schools and libraries with lower prices and discourage participation in consortia or other aggregate buying groups? Might transparency of pricing also help ensure that providers are complying with the Commission's lowest corresponding price rule?

183. Finally, we note that § 54.501(c)(3) of our rules requires service providers to “keep and retain records of rates charged to and discounts allowed for eligible schools and libraries—on their own or as part of a consortium. Such records shall be available for public inspection.” We seek comment on the extent to which applicants can and have availed themselves of that provision of our rules to determine the prices paid by other applicants for E-rate supported services. We also seek comment on the benefits and shortcomings of that provision of our rules and whether we can and should amend it to increase pricing transparency in order to drive down prices of E-rate supported services.

184.

Greater Assistance to Schools and Libraries.

We also seek comment on whether the Commission, USAC, or other entities should take a more active role in assisting applicants in identifying cost-effective purchasing options. The Commission previously directed USAC to develop a pilot program testing an online list of internal connections equipment eligible for discounts. USAC has not updated the database in some time in part because keeping the list current imposed significant administrative burdens on both USAC and vendors. We propose to terminate that pilot program and we invite participants to comment on how the Commission can transition to a more effective system to provide more transparent price information for applicants. For example, should we direct USAC to establish an office to help applicants identify the best prices for E-rate eligible services and products? Such an office could be staffed by consultants with expertise in configurations of educational technologies and the best prices and service providers, and could mine the USAC E-rate databases to identify and publicly disclose attractive prices, terms and conditions for the products and services. We seek comment on the likely cost of providing that sort of expert assistance and whether the benefits of such an undertaking would outweigh its costs. We also ask whether we can, or should, limit access to this pricing data to participants in the E-rate program.

185. If we adopt such an approach, should we amend our rules so that applicants who chose a product or service at the price posted on the Web site would be exempt from any additional competitive bidding requirements for such purchases? We seek comment on ways to implement such a proposal. How should the office identify best terms? What criteria should the office use to filter the information?

186. We also seek comment on whether we should direct USAC to employ a team of technical experts who could assist applicants in planning and designing cost-effective networks? Is there a need for such assistance? What are the costs and benefits of housing a team of technical experts at USAC? How should

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