E-Rate and StateNets

1. E-Rate and StateNets George McDonald and Cynthia Schultz Schools and Libraries Division Universal Service Administrative Company Tempe, Arizona February 5, 2004

2. Eligible/Ineligible Services • Dark fiber • Dark fiber refers to fiber optic cable for which the service provider has not provided modulating electronics, i.e., it is "dark.” • The FCC has not resolved whether dark fiber is a telecommunications service. Pending resolution of this issue, it is not eligible for funding. • Funding Year 2004 and later funding years. • FCC seeks comment on eligibility of dark fiber in Third Report and Order and Notice of Proposed Rulemaking.

3. Eligible/Ineligible Services • Dark fiber • In cases in which a school or library has previously purchased equipment to light fiber, such equipment may be traded-in to the service provider and leased back by the applicant. • This is considered a minor contract modification under the FCC’s rules if it has only a negligible effect on price, quality, quantity or delivery under the original contract.

4. Eligible/Ineligible Services • Dark fiber • It is appropriate to provide Priority 1 discounts on service provider charges to recoup the cost of leasing optical equipment to light fiber, when that optical equipment is the single basic terminating component of an end-to-end network and it is necessary to provide end-to-end telecommunications or Internet access service.

5. Eligible/Ineligible Services • Voice-over IP (VoIP) service • The FCC has yet to determine whether VoIP is a telecommunications service or an application provided over an unregulated information service. Pending resolution of this issue, VoIP service is not eligible for funding. • Voice-over IP (VoIP) equipment • VoIP equipment is eligible as Internal Connections.

6. Eligible/Ineligible Services • Educational purposes • Activities that are integral, immediate, and proximate to the education of students or to the provision of library services to library patrons qualify as “educational purposes.” • Activities that occur on library or school property are presumed to be integral, immediate, and proximate to the education of students or the provision of library services to library patrons.

7. Eligible/Ineligible Services • Educational purposes • Telecommunications Services and Internet Access provided to on-site non-instructional facilities are eligible for E-rate discounts under this revised definition beginning with Funding Year 2004. • The customary work activities of employees of a school or library that occur on school or library property are now presumed to fall under the definition of educational purposes.

8. Letters of Agency • Must contain: • Name of consortium leader • Name of consortium member • Timeframe or Funding Year • Open-ended timeframes not acceptable • Types of services that are being requested • Signature and title of authorized person for consortium member

9. Contracts • FCC rules require applicant to sign a contract prior to the filing of a Form 471. 47 C.F.R. section 54.504(C). • Contract must comply with state contract law. • Applicant and service provider must also comply with local and state procurement laws. • Applicant must provide signed and dated contracts for review and audits.

10. Contracts • This rule does not apply to non-contracted tariff or month-to-month services. • Verbal agreements are not acceptable. • Quotes are not acceptable. • Purchase orders may or may not meet state contract requirements.

15. State Master Contracts • If the state master contract requires the issuance of purchase orders or contains other requirements for applicants -- • The applicants must follow the applicable dates set forth in the state master contract. • For example, if the state master contract requires the applicant to issue a purchase order by July 1, then the applicant is required to meet that deadline.

16. Reporting the Contract Award Date • The Contract Award Date cannot be earlier than the 29th day after the posting of the Form 470. • If an applicant files its own Form 470 and chooses either a new or a pre-existing state master contract as the most cost effective bid, the applicant should • Use the date on which it decided to use the state master contract as the relevant Contract Award Date in its submitted Form 471 application.

17. Contract Amendments • Contract services may be amended if the contract allows for such an amendment, but if those services were not posted on the original Form 470 or RFP, the applicant must post a new Form 470.

18. Multi-year Contracts • A multi-year contract means a contract that covers more than one year. • For example, a three-year contract would expire at the end of the third year. • The applicant should indicate in its RFP and/or Item 13 on the Form 470 its intent to enter into a multi-year contract for services. • For example, the applicant could indicate its intent to enter into a three- to five-year contract.

19. Contracts with Voluntary Extensions • Contract expires at the end of its original term and may be voluntarily extended for one or more years pursuant to the provisions in the contract. • Applicant cannot extend the contract beyond its original expiration date without posting a new Form 470 and considering all bids received, unless – • voluntary extensions were indicated in Item 13 of the Form 470 or in the RFP or • for non-recurring services, contracts may be voluntarily extended to coincide with the appropriate deadline for the implementation of delivery and installation for nonrecurring services. • Applicants should file a Form 500 to notify USAC of such contract extensions.

20. Contract Issues • SLD does not intervene in disputes that are contract-based rather than program-rule based. • Contract disputes should be brought before local and state courts, not the SLD or the FCC.

21. Reimbursements v. Discounts • Service provider is required to permit the applicant prior to the submission of the Form 471 to choose the Method of Payment — BEAR v. SPI — for discounted services • FCC Second Report and Order encourages the applicant and service provider to work together to determine the method of payment. • FCC Second Report and Order encourages applicants to include the method of payment in the contract.

22. Eligible Telecom Provider • Providers of Telecommunications Services • Must contribute to the Universal Service Fund, if applicable. • Must provide telecommunications services on a common carriage basis to be an eligible telecommunications provider.

23. Eligible Telecom Provider • Providers of Telecommunications Services • A common carrier must • (1) allow the customer to transmit information of its own design and choosing, without change in the form or content of the information, and • (2) provide that capability for a fee directly to the public, or to such classes of users as to be effectively available to the public (i.e., hold itself out to serve indifferently all potential users).

24. USAC ETP Designation Requirements • Providers of Telecommunications Services • Must file Form 499A on an annual basis and check at least one box on Line 227 and file Forms 499Q, if applicable. • Must revise the Form 498 to reflect Form 499 Filer. I.D. • SP must be designated an ETP with a “Y” in SPIN database.