[Federal Register Volume 84, Number 245 (Friday, December 20, 2019)]
[Rules and Regulations]
[Pages 70026-70037]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-27219]
=======================================================================
-----------------------------------------------------------------------
FEDERAL COMMUNICATIONS COMMISSION
47 CFR Part 54
[WC Docket No. 13-184; FCC 19-117; FRS 16311]
Modernizing the E-Rate Program for Schools and Libraries
AGENCY: Federal Communications Commission.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: In this document, the Federal Communications Commission
(Commission) makes permanent the ``category two budget'' approach that
the Commission adopted in 2014 to fund internal connections, which are
primarily used for Wi-Fi, a technology that has enabled schools and
libraries to transition from computer labs to one-to-one learning.
DATES: Effective January 21, 2020, except for Sec. Sec. 54.502(d) and
(e) and 54.513(d) which are delayed. The Commission will publish a
document in the Federal Register announcing the effective date of those
rules.
FOR FURTHER INFORMATION CONTACT: Stephanie Minnock, Wireline
Competition Bureau, (202) 418-7400 or TTY: (202) 418-0484.
SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Report
and Order (Order) in WC Docket No. 13-184; FCC 19-117, adopted on
November 20, 2019 and released on December 3, 2019. The full text of
this document is available for public inspection during regular
business hours in the FCC Reference Center, Room CY-A257, 445 12th
Street SW, Washington, DC 20554 or at the following internet address:
https://docs.fcc.gov/public/attachments/FCC-19-117A1.pdf.
I. Introduction
1. The Commission's E-Rate program is a vital source of support for
connectivity to--and within--schools and libraries. In particular, the
E-Rate program provides funding for internal connections, which are
primarily used for Wi-Fi, a technology that has enabled schools and
libraries to transition from computer labs to one-to-one digital
learning. In this document, the Commission makes permanent the
``category two budget'' approach that the Commission adopted in 2014 to
fund these internal connections. The category two budget approach
consists of five-year budgets for schools and libraries that provide a
set amount of funding to support internal connections. In adopting this
approach, the Commission also established a five-year test period (from
funding year 2015 to funding year 2019), to consider whether this
approach would be effective in ensuring greater and more equitable
access to E-Rate discounts.
2. Based on the overwhelming record support for the category two
budget approach from the E-Rate community, coupled with the
Commission's own experience during the five-year test period, the
Commission concludes that the category two budget approach has provided
broader, more equitable, and more predictable funding for schools and
libraries than under the prior rules. The budget amount provided to
schools and libraries during the test period proved to be successful,
and, moving forward, the Commission intends to generally remain within
those parameters of support. Building on the success of the category
two budget approach, the Commission takes important steps to (1)
streamline processes to ensure more equitable, consistent distribution
of support for small, rural schools and libraries within the existing
E-Rate program budget for category two services, (2) simplify the
category two budgets, and (3) decrease the administrative burden of
applying for category two services. As a result of the measures the
Commission takes in this document, the category two budget approach
will become more streamlined, furthering the program's overall
effectiveness and the deployment of Wi-Fi in schools and libraries
across the country.
II. Discussion
3. To ensure that our nation's students and library patrons have
access to high-speed broadband and to further the Commission's goal of
bridging the digital divide for all Americans, it permanently extends
the category two budget approach, which has provided certainty and more
equitable funding to schools and libraries for the last five funding
years. Doing so avoids a return
[[Page 70027]]
to the two-in-five rules. Furthermore, informed by the Commission's
experience with administering the category two budgets during the five-
year test period, it simplifies and streamlines the category two budget
approach to allow applicants to make more effective use of category two
funding and to reduce administrative burdens. As part of these
improvements, the Commission also provides more equitable, consistent
support for small, rural schools and libraries within the existing
category two services budget and make permanent the eligibility of
managed internal broadband services, caching, and basic maintenance of
internal connections.
4. As detailed in the following, to ensure a smooth transition to
the new rules, the Commission establishes rules for funding year 2020
that extend the five-year test period for an additional year and
provide a prorated amount of category two support to all applicants. In
this way, the Commission balances the desire to meaningfully improve
the category two budget approach while minimizing the impact associated
with such changes for the upcoming funding year. Thus, the new rules
the Commission adopts for the category two budget approach will apply
beginning in funding year 2021, at which time the budgets will reset
for all applicants as the Commission moves to fixed five-year funding
cycles, the first of which will run from funding years 2021 to 2025.
5. Based on a review of the record, the Commission first adopts its
proposal to make the category two budget approach permanent, thus
ensuring that the two-in-five rules will not come back into effect for
any applicants following funding year 2019. Doing so is supported by
the record and consistent with the findings of the Bureau's Category
Two Budget Report. Commenters unanimously support the category two
budget approach, and no commenter expressed a desire to return to the
problematic two-in-five rules. In particular, commenters state that the
benefits of the category two budget approach far outweigh any benefits
of the alternative two-in-five rules approach. This view is consistent
with the Bureau's finding that, since funding year 2015, funding has
gone to all fifty states and all discount levels in a manner that more
closely approximates the composition of participating schools and
libraries in the E-Rate program overall.
6. Moreover, there is agreement that the category two budget
approach ``has led to wider, more robust deployment of broadband
services within schools and libraries.'' Likewise, the category two
budget approach has ``enabled all applicants, regardless of their place
on the E-Rate discount matrix, to receive funding for broadband
equipment and services inside their school and library buildings.''
With respect to libraries, ALA observed that ``for the first time in
over fifteen years our libraries are assured of receiving C2 funding.
The result is that all libraries, whether in rural remote areas or
urban centers, have access to much needed funding for their in-building
network requirements.'' Commenters also note that extending the
category two budget approach permanently will give ``both applicants
and service providers confidence that category two funding will
continue in a reliable and predictable manner.''
7. Finally, the record contains no evidence of any significant
economic costs associated with a transition to a permanent category two
budget approach. Accordingly, the economic benefits of transitioning to
a permanent category two budget are expected to outweigh the costs. For
all of these reasons, the Commission makes the category two budget
approach permanent.
8. Recognizing that the category two budget approach, while
successful during the five-year test period, can be improved upon, the
Commission takes this opportunity to simplify the budgets and make
category two funding even more effective than during the last five
funding years. Specifically, beginning in funding year 2021, the
Commission resets all applicant budgets and begin fixed five-year
budget cycles. As part of this modification, the Commission also adopts
district-wide and library system-wide budget calculations, which will
relieve applicants of some of the most significant administrative
burdens associated with the category two application process and
management of the budgets. Furthermore, to ensure the needs of schools
with low student counts and small libraries, particularly those in
rural areas, are met and to promote their increased participation, the
Commission increases the category two funding floor to $25,000. The
Commission maintains the per-student budget multipliers that served
schools well during the five-year test period and adopt a single budget
multiplier for libraries, all of which will be adjusted for inflation
every five years. Additionally, the Commission makes managed internal
broadband services, caching, and basic maintenance of internal
connections permanently eligible, and confirm their eligibility for all
applicants in funding year 2020.
9. First, to facilitate the transition to the new rules, the
Commission will reset all budgets to the full amount eligible under the
new rules, which will provide applicants the opportunity to deploy
internal connections and make it easier for them to track their
category two budgets in the new funding cycle. All applicants will
start with a new five-year budget cycle beginning in funding year 2021,
regardless of whether they completed their previous five-year budget
cycle during the test period.\1\ The Commission agrees with commenters
that resetting the budgets at the end of the test period will alleviate
confusion, whereas rolling over remaining funds from the test period
would be difficult to track given the changes to the rules and the
budget calculations.
---------------------------------------------------------------------------
\1\ The budget reset applies to all applicants, including those
applicants who were subject to the relief the Commission provided in
the response to Hurricanes Harvey, Irma, and Maria.
---------------------------------------------------------------------------
10. Next, as part of the improvements to the category two budget
approach the Commission makes in this document, and to ease the
administration of the budgets, the Commission adopts fixed five-year
budget cycles, with the first such cycle running from funding year 2021
through funding year 2025. Applicants may submit applications in any
funding year during this five-year cycle. In the 2019 Category Two
Notice, 84 FR 34107, July 17, 2019, the Commission sought comment on
using rolling budgets, or setting fixed five-year budget cycles, as
part of the permanent category two budget rules, and asked if fixed
five-year cycles would be easier to administer. Commenters largely
support fixed five-year cycles, noting that fixed budgets present the
``clearest and cleanest approach,'' and that a ``simplified, fixed
timeframe for budget expenditure for all applicants will alleviate much
of the confusion'' created by rolling budgets. The Commission agrees
and now adopts fixed five-year budget cycles to simplify the
administration of the budgets and eliminate a source of confusion for
applicants. Fixed cycles also present natural beginning and ending
points for budgets, making it easier to make changes and updates to the
budgets in future funding years should the need to do so arise. These
changes will allow for the smoothest transition to the new rules, and
the Commission agrees with commenters who stated that the risks
associated with a fresh start and fixed budgets are minimal.
11. The Commission notes that no commenter supported rolling
budgets that begin the first year a school or
[[Page 70028]]
library requests category two funding and look back four years, as
described in the 2019 Category Two Notice. Some commenters, however,
supported rolling over unused funds from the five-year test period into
new, fixed five-year cycles. The Commission concludes, however, that
the administrative burden of carrying unused funds from one budget
period to another far outweigh the benefits of doing so, and the
program would be easier to administer with clear starting and ending
points to budget periods. Other commenters support rolling budgets to
the extent that fixed budgets will present challenges with schools
opening or closing during a five-year period. The Commission disagrees
and finds instead that fixed five-year cycles present the simplest
rules to administer, and in fact minimize the confusion caused by a
school opening or closing mid-cycle. Under a rolling scenario, that
school district's budget would need to reflect changes caused by a
school opening or closing for an extended period of time, while fixed
budget cycles reset at the conclusion of the five-year cycle, giving
the district an opportunity to start fresh calculating its budget.
Overall, the benefits some applicants may receive from carrying over a
portion of unused funding, or from being able to start calculating
budgets on a rolling basis, are outweighed by the ability of all
applicants to calculate budgets on a clear, predictable basis, with
established beginning and ending points that also present clear
opportunities for future modifications, should the need arise.
12. Next, as part of the permanent rules that will go into effect
in funding year 2021, the Commission adopts district-wide and library
system-wide category two budgets--a change that nearly all commenters
support. Specifically, school districts and library systems will now
have a single budget to administer, and the district or library system
will have the flexibility to allocate category two funding among its
schools and libraries as it sees fit, vastly simplifying the planning
and application process for category two services. This change will
simplify some of the more complicated aspects of administering the
budgets and applying for funding (such as dividing the costs of shared
services among multiple entities, estimating student counts at new
schools, and counting part-time students), without eliminating
protections against waste, fraud, and abuse, which continue to apply
with respect to each individual school and library included in the
school district-wide and library system-wide budgets. In particular,
calculating the budgets in this way will largely eliminate the need for
applicants to maintain and administer separate budgets for each school
or library in a district or library system and minimize instances where
funding requests are delayed or denied because they exceeded the budget
for a particular school or library. Further, as commenters noted,
different schools have different technological needs, and a single
district-level or system-level budget will allow the school district or
library system to determine how best to account for these differences.
By affording applicants the flexibility to determine how best to
allocate funding within their districts and library systems, the
Commission ensures a more effective use of E-Rate funds.
13. In adopting district-wide budgets, the Commission provides
general guidance on what constitutes a ``school district.'' Given that
applicants are likely to be in the best position to apply this guidance
to their particular circumstances, the Commission does not strictly
define the term for the purposes of applying for and calculating a
district-wide budget. In response to the Commission's request for
comment on how applicants and USAC should determine which entities are
part of a school district for calculating category two budgets, the
Commission received several comments, but no clear consensus. To
provide administrative ease and flexibility to account for differing
scenarios and consistent with the manner in which applicants currently
calculate district-wide discount rates, applicants should consider all
schools that fall under the control of a central administrative agency
as a district for the purpose of calculating a shared, district-wide
budget.
14. Under this approach, private schools and charter schools that
operate independently of a public school district or a central
administrative agency, and are individually responsible for their
finances and administration, should separately calculate their category
two budgets and apply for funding. Independent charter schools, private
schools, and other eligible educational facilities that seek support
for more than one school building should factor all students in
facilities under the control of their central administrative agency or
entity into the category two budget calculation. For example, if a
group of parochial schools shares administration and finances, they
should calculate a single, ``district-wide'' category two budget for
all students under the central administrative entity or agency.
15. To address issues that may arise regarding changes to school
districts and library systems during a five-year budget cycle, as well
as issues that may arise in accommodating states' varied definitions of
school or library districts, the Commission directs the Bureau to
provide clarifying guidance consistent with the terms of the Order, and
publish clarifications or additional guidance with respect to the
implementation and administration of district-wide and library system-
wide category two budgets to the extent necessary.
16. Full-Time Enrollment. In another effort to streamline both the
application filing and review process, going forward the Commission
will base student counts on full-time enrollment only and eliminate the
need for schools or school districts to count part-time students in
their enrollment numbers. Commenters support this change as a
simplification that stems from district-wide budgets. More
specifically, because the district-wide budgets will allow school
districts greater flexibility in allocating category two support, it is
no longer necessary for schools with lower full-time enrollment, but
high part-time enrollment to take the often difficult and time-
consuming steps to count and verify their part-time enrollment numbers
in order to obtain category two funding. Using district-wide budgets,
the Commission believes that all schools in a district will have
adequate support to ensure appropriate deployment of local area
networks.
17. The Commission also will no longer permit school districts to
estimate the number of students for buildings under construction
because those students will otherwise be accounted for by the district
enrollment numbers. However, an independent school with its own entity-
level budget will still be allowed to estimate its enrollment numbers
in order to be able to request category two support while construction
is underway. As presently required by the Commission's rules, if an
applicant overestimates the number of students who enroll in that
school, it must return to USAC any funding in excess of that which it
was entitled based on the actual enrollment by the end of the next
funding year.
18. To ensure that all E-Rate applicants, including small schools
and libraries in rural areas, have the funding they need to deploy
their internal connections networks within the existing E-Rate program
budget for category two services, the Commission takes several steps to
make access to category two funding more equitable and, in turn, result
in a more consistent distribution of support for small, rural
[[Page 70029]]
schools and libraries. First, the Commission raises the category two
budget funding floor from $9,200 to $25,000. Second, the Commission
eliminates the funding disparity between urban and rural libraries
inherent in the current bifurcated approach that disadvantages rural
libraries and adopt a unified budget multiplier for all libraries.
19. Funding Floor. To ensure that small schools and libraries have
sufficient funding to deploy their internal connections, the Commission
increases the funding floor to a pre-discount level of $25,000 over the
five-year funding cycle beginning in funding year 2021. In the 2019
Category Two Notice, the Commission sought comment on whether the
funding floor should be increased to $25,000. The Commission agrees
with commenters that the existing funding floor level of $9,200,
combined with the overall administrative burden of requesting category
two support, resulted in a low participation rate by small and rural
entities with low student enrollment or small square footage. For
instance, from funding year 2015 through funding year 2019, school
sites nationwide, on average, used 60% of their category two funding
support, but small sites that only qualify for the funding floor, on
average, used only 33% of their category two funding support, in large
part because so little funding was available to them or because the
benefits of the funding at the floor were often lower than the costs
associated with the application process.
20. To illustrate why few entities at the funding floor (which
include many rural schools and libraries) took advantage of category
two funding during the five-year test period, the Commission considers
a small school at an 85% discount rate with 61 students. During that
period, which set the budget floor at $9,200, such a school would have
been eligible to receive category two support of just $7,820 despite
having many of the same technical needs for its Wi-Fi networks as
larger schools. In fact, one commenter estimates that it would cost
$24,350 to deploy switches, wireless access points, wireless access
point controllers, routers, and cabling to a small school with 61
students. The Commission agrees with those commenters that argue that a
budget floor of $25,000 is sufficient to ensure that those small sites
that previously did not participate can deploy internal connections
networks. With a $25,000 funding floor, that same small school at an
85% discount rate will receive $21,250 in E-Rate support. The
Commission expects that this additional funding, in addition to the
increased flexibility of district-wide and library system-wide
budgeting generally, will make it attractive and beneficial for small
schools and libraries to take advantage of category two funding
support. And the Commission finds that this increase in the funding
floor can be done within the existing E-Rate program budget for
category two services in combination with its other reforms to the
category two budget approach.
21. School Multiplier. Consistent with the findings in the Category
Two Budget Report, the Commission continues to believe that the
existing category two budget mechanism is generally sufficient for
schools, and thus the Commission adopts its proposal to maintain the
$150 per student school budget multiplier adjusted for inflation from
the five-year test period, and--for administrative simplicity--adjust
that amount ($166.44) up to $167 per student for the new five-year
funding cycle beginning in funding year 2021. The Commission finds that
maintaining the same per-student level of support as was available in
the previous category two budget cycle is sufficient to meet schools'
internal connections needs. This level of support enabled 85% of school
sites to receive category two funding support during the funding year
2015 through funding year 2019 budget cycle. Many schools required less
funding than the $167 per student budget multiplier the Commission
adopts in this document--in fact, 50% of schools used less than $131
per student over those five years.
22. Some commenters argue that a higher budget multiplier is needed
for schools to build their Wi-Fi networks. The Commission disagrees.
The Commission finds that increasing per-student budgets beyond the
rate of inflation is not necessary at this juncture, particularly given
the other changes the Commission makes to the category two budget
approach in the Order. In fact, the Commission believes that the
changes made in this document will lead to additional category two
funding support being available for those schools that need it.
23. The streamlined district-wide budget approach the Commission
adopts in this document empowers school districts to allocate category
two funding support to the sites that need it most. Entity-specific
budgets have constrained category two funding support to be directed to
specific sites based on enrollment numbers or square footage without
the ability to make adjustments for level of need. If there was a
school in a district that required less than the per-site budget
allocation to deploy a Wi-Fi network and another school in the district
that required more than the per-site allocation, the district could not
re-direct the unused funding to complete the more expensive network,
which meant that part of the category two budget support for the
district went unspent and an identified need went unmet. Implementing
district-wide budgets lifts this restriction and allows applicants to
allocate category two funding to the sites that most need it, which, in
turn, permits them to take advantage of a greater portion of their
category two budgets. For example, Funds For Learning estimates that
adopting school district and library system-wide budgets will make an
additional $94.1 million per year in category two funding available to
applicants. Further, by increasing the funding floor, the Commission is
providing additional category two funds to some of the smallest schools
in the country. As a result, under the Commission's new approach, these
small schools do not need an increase in the per-student allocation to
receive an increase in the category two funding available to them.
24. Library Multiplier. To eliminate the funding disparity between
rural and urban libraries inherent in the existing bifurcated approach
to calculating budgets for libraries and to ease administration, the
Commission establishes a single pre-discount budget multiplier for all
libraries of $4.50 per square foot over the five-year funding cycle
beginning in funding year 2021. Currently, the library multipliers
differ based on geography. Specifically, libraries located in cities
and urbanized areas with a population of 250,000 or more, as identified
by the Institute of Museum and Library Services (IMLS) locale codes of
11, 12, and 21, receive $5.00 per square foot, adjusted annually for
inflation, and libraries in all other locations receive $2.30 per
square foot, adjusted annually for inflation.
25. As demonstrated by the record, the cost to deploy a Wi-Fi
network does not vary significantly based on geography. As internal
connections are provided within school and library buildings, which are
similar regardless of location, the Commission is now persuaded by
experience from the test period that the costs to install the equipment
and the type of equipment needed to provide connections within these
buildings should also be comparable regardless of location. Indeed,
some commenters contend that internal connections deployment costs are
higher in rural areas than urban areas, and even those commenters that
[[Page 70030]]
favor a higher budget multiplier for libraries in highly-concentrated
urban areas recognize that an increase in the budget multiplier for
rural libraries is needed. Accordingly, the Commission finds that
experience has not borne out the prediction that costs would be higher
and the need for support would be greater in highly concentrated urban
areas than for libraries in the rest of the country.
26. Moreover, the Commission's experience during the five-year test
period shows that a lower budget multiplier for rural applicants
creates a considerable disparity in access to the amount of category
two funding support available for rural libraries. As the Bureau's
Category Two Budget Report found, rural libraries seek category two
funding support at a much lower rate than urban libraries. Commenters
attributed rural libraries' lack of participation to insufficient
budgets and recommended an increase to the multiplier for rural
libraries. Raising the budget multiplier for libraries outside of
highly-concentrated urban areas, therefore, is a necessary step towards
ensuring that they have sufficient funding to deploy their internal
connections.
27. Finally, setting a single budget multiplier for all libraries
simplifies the library budget calculations for applicants and will
reduce the application review burden for USAC. Without the need to
determine the IMLS locale code for each E-Rate supported library and
the overall budget multiplier for a library system, applicants and USAC
should be able to increase the efficiency and pace of the filing and
processing of applications.
28. To provide a single budget multiplier for all libraries within
the existing budget, the Commission adopts a pre-discount multiplier of
$4.50 per square foot for all libraries. The Commission calculated this
number, first, by estimating the potential total of all pre-discount
library budgets from funding year 2015 to funding year 2019 using all
public libraries. The Commission then divided this potential total of
all pre-discount library budgets by the total square footage of all
public libraries. The Commission provided a slight upward adjustment to
$4.50 per square foot to reflect the anticipated participation rates of
libraries requesting category two funding under the E-Rate program.
This new budget multiplier, coupled with the increased funding floor,
will make additional category two support available for those small and
rural libraries that did not participate during the five-year test
period.
29. The Commission's experience indicates that a pre-discount
multiplier of $4.50 per square foot will minimally impact libraries in
highly concentrated urban areas while providing sufficient additional
funding to enable other libraries to deploy internal connections
networks. Given that 91% of libraries in highly concentrated urban
areas used less than $3.99 per square foot from funding years 2015
through 2019, the Commission expects that this reduction will affect
only a small proportion of libraries in those areas. Indeed, those
applicants will still be under budget, even with a budget of $4.50 per
square foot. Moreover, as with schools, introducing library system-wide
budgets will give library systems enhanced flexibility to allocate
funding throughout their sites as they see fit, and raising the funding
floor will provide greater funding for small libraries, even if their
per square foot allocations are reduced slightly.
30. Calculating District-Wide and Library System-Wide Budgets.
Based on the changes to the budget multipliers and funding floor the
Commission makes in this document, the Commission details how
applicants will calculate their budgets under the district-wide and
library system-wide budget methodology. Specifically, to ease
administration and to recognize that school and library systems are in
fact systems with generally unified budgets that have the ability to
direct support to whatever school or library in the system needs it
most, the Commission requires school districts and library systems to
calculate total budgets using their aggregate student count or square
footage and the ``aggregate funding floor'' (i.e., the aggregate number
of schools or libraries times the funding floor).\2\ Therefore, a
school district or library system need only determine the aggregate
number of students or square footage throughout the system as well as
the total number of eligible schools and libraries in the system,
without detailing the precise number of students or square footage
attributable to any individual school or library. The Commission
expects most school districts and library systems to receive funding
significantly above the aggregate funding floor and to appropriately
allocate funds to those that need it most. In addition, the Commission
recognizes that smaller school districts and library systems have less
access to shared resources and are more likely to be located in rural
areas where funding is scarce. As such, the Commission creates an
exception for small school districts and library systems. Specifically,
the Commission gives school districts and library systems with 10 or
fewer sites the option to calculate their budgets on a per-site basis
by adding together the budgets of each eligible site within the
district or library system.
---------------------------------------------------------------------------
\2\ In other words, a school district with 10,000 students would
normally have an aggregate budget of $1,670,000. If those students
were spread across 100 schools, then its budget would instead be
$2,500,000 (the aggregate funding floor). Accordingly, the funding
floor only comes into play if the aggregate budget for the system
would fall under the aggregate funding floor for the system.
---------------------------------------------------------------------------
31. To illustrate how the calculation would work, the Commission
considers a school district with five schools, three of which have 200
students each and two of which have 100 students each. Using the $167
budget multiplier for schools and the $25,000 funding floor for funding
year 2021, the school district would have a total pre-discount budget
of $150,200, to spend across the five schools over the five-year
period.\3\ Giving small systems this option will ensure that small,
rural school districts and library systems can take full advantage of
the increased funding floor, with only minimal increases to
administrative complexity for applicants and for USAC.\4\
---------------------------------------------------------------------------
\3\ Each school with 100 students would be eligible for a
$16,700 budget (which is less than what they would receive under the
funding floor) and each school with 200 students would be eligible
for a $33,400 budget. Hence the aggregate budget here is 2 x $25,000
+ 3 x $33,400 = $150,200. Without this exception, the school
district's aggregate budget would be determined by multiplying the
aggregate number of students in the district ((3 x 200) + (2 x 100)
= 800) by the school multiplier ($167). Hence, the aggregate budget
would be 800 x $167 = $133,600, which is less than what the
district's budget would be under the exception.
\4\ Although the Commission recognizes that allowing site-by-
site calculations increases the number of auditable issues for
applicants and USAC and could lead some applicants to shuffle
headcounts to maximize support, they find such concerns of little
consequence for the smaller school districts and library systems for
which this option was created. The Commission's experience with USAC
audits persuades the Commission that the administrative burdens on
USAC are likely to be manageable if the Commission limit this option
to school districts and library systems with 10 or fewer locations,
particularly given that those districts and systems present fewer
opportunities for shifting headcount and, on that basis, gaming the
funding support rules. Thus, although the record does not enable the
Commission to precisely identify the ``ideal'' number of locations
at which to draw this line, the Commission finds that its choice of
10 or fewer reasonably balances its interest in managing the
administrative burden of the program and guarding against the risk
of gaming.
---------------------------------------------------------------------------
32. Inflation Adjustment. For both budget multipliers and the
funding floor, the Commission amends its rules to make a one-time
adjustment for inflation before the start of the filing window for each
five-year funding cycle. Commenters generally agree that
[[Page 70031]]
a one-time inflation adjustment over a five-year cycle will reduce
confusion surrounding the category two budget calculations, although
commenters suggested different approaches for calculating inflation.
The Commission rejects suggestions that use either predictions or other
inflation indicators as too complex. Instead, the Commission finds that
the simplest, most effective, and most accurate approach is to adjust
for inflation before the start of the filing window for each five-year
funding cycle, providing notice to applicants about the upcoming budget
multipliers and funding floor. Adjusting for inflation in this way will
simplify the budget calculation, and will ensure that subsequent five-
year funding cycles accurately reflect historical inflation rates. To
ensure that applicants know their budgets well in advance of funding
year 2021, the Commission announces the budget multipliers and the
funding floor in the Order. The Commission's calculations of the budget
multipliers and funding floor account for future inflation through
funding year 2021 using estimated inflation adjustments. Accordingly,
these figures will not be further adjusted for inflation between now
and the funding year 2021 filing window, or again during this initial
five-year funding cycle.\5\
---------------------------------------------------------------------------
\5\ Specifically, as discussed above, the Commission establishes
a school budget multiplier of $167, a library budget multiplier of
$4.50, and a funding floor of $25,000 for funding year 2021.
---------------------------------------------------------------------------
33. For future funding years, before the start of every five-year
funding cycle, the Commission directs the Bureau to calculate and
announce the inflation adjustments. Specifically, the Bureau will
announce the budget multipliers and funding floor as adjusted for
inflation at least 60 days before the start of the filing window for
the next five-year funding cycle. For funding year 2026 and beyond, the
Commission shall use the last four quarters of available data on the
Gross Domestic Product Chain-type Price Index (GDP-CPI) compared with
the equivalent quarters from the beginning of the five-year funding
cycle. The increase shall be rounded to the nearest 0.1% and shall be
used to calculate the category two budget multipliers and funding floor
for that five-year funding cycle. The budget multipliers and funding
floor will also be rounded to the nearest cent to eliminate confusion
surrounding the calculation, as supported by commenters.
34. Student Counts and Square Footage. To further reduce
administrative burdens, and consistent with the record, the Commission
will require applicants to provide student counts and library square
footage for schools and libraries only once (calculated at the time
that the discount is calculated that funding year) during a five-year
funding cycle beginning with the first such cycle that starts in
funding year 2021. Specifically, under the fixed, five-year budgets the
Commission adopts in this document, the Commission will require
applicants to validate their student counts or library square footage
for each school and library in the district or library system in the
first year an applicant applies for category two support during the
relevant five-year cycle. Applicants, if they choose to do so, can
update their student counts or square footage information in subsequent
funding years to reflect, for example, an increased budget due to
increased student enrollment. Applicants, however, are not required to
do so, and can instead keep the student count and square footage
information for the entire five years of the budget cycle. The
Commission notes, contrary to what was suggested in the record, that
the requirement that the category two budget enrollment numbers only be
validated once every five years has no impact on the requirement that
schools update their enrollment and National School Lunch Program or
Community Eligibility Provision numbers for purposes of calculating
discount rates each year.
35. In the 2019 Category Two Notice, the Commission proposed to
permanently extend the eligibility of managed internal broadband
services, caching, and basic maintenance of internal connections under
a category two budget approach consistent with the Commission's
determination in 2014 to make these services eligible for support
through funding year 2019. Commenters expressed broad support for
retaining the eligibility of these three services. Consistent with the
Commission's determinations in the 2014 First E-Rate Order, 79 FR
49160, August 19, 2014, it finds that category two budgets allay
concerns about wasteful spending on these three services, and the
Commission therefore sees continued benefit for the functionality of
networks within schools and libraries in making these services eligible
for category two support. Accordingly, the Commission adopts the
proposal to make these services eligible for category two support under
the permanent category two budget approach.
36. The 2019 Category Two Notice sought comment on whether
additional services should be made eligible for category two funding.
In response, commenters urged the Commission to make eligible several
additional services. For example, several commenters requested that the
Commission makes eligible under category two the filtering technology
necessary for compliance with the Children's Internet Protection Act.
But the Commission has previously explained that the Children's
Internet Protection Act prohibits recipients from obtaining discounts
under the universal service support mechanism for the purchase or
acquisition of technology protection measures necessary for compliance
with the Children's Internet Protection Act. Others requested that the
Commission makes eligible services that it has either previously made
ineligible or that the Commission has previously declined to make
eligible. The Commission declines to make additional services eligible
under category two so that E-Rate eligible entities continue to focus
requests for category two funding on the internal connections that are
truly necessary to deliver high-speed broadband to students and library
patrons via local area networks and wireless local area networks,
consistent with the Commission's reasoning in the 2014 First E-Rate
Order. And the Commission finds that the requests of still other
commenters to make additional services eligible for category one
support are beyond the scope of this proceeding.
37. At the request of several commenters, the Commission directs
the Bureau to address ongoing issues related to the application of its
eligible services rules with respect to category two services by
providing clarifications in instances where the terminology used in the
Commission's rules does not align with the terminology used by service
providers in the context of bid responses and invoicing or has
otherwise caused applicant uncertainty or confusion about how to
request category two services.
38. Equipment Transfer Rule. Consistent with the Commission's
efforts to streamline the process for requesting support for category
two services, it now eases the Commission's equipment transfer rule to
lessen the paperwork burden on school districts and library systems. As
the Commission stated in the 2019 Category Two Notice, and supported by
the record, the original concerns that led to the adoption of a
prohibition on equipment transfers for a period of three years after
purchase--namely, that applicants might replace or upgrade their
equipment more often than necessary or
[[Page 70032]]
to circumvent the then-existent two-in-five rules--are no longer
relevant under a district-wide and library system-wide category two
budget approach. Under the district-wide and library system-wide
category two budget approach, the category two purchases for all
individual schools within the district fall under the same budget, so
there will no longer be the incentive to purchase a piece of equipment
for one site and move it to another. This incentive existed under the
two-in-five rules because there were limits on the internal connections
funding that each individual school could receive. Under those rules,
if an individual school did not request equipment when it had the
opportunity to do so, another school in the same district could
circumvent the two-in-five rule by requesting that equipment and moving
it to the facility where it was needed. As the two-in-five rules no
longer apply, the provisions of the equipment transfer rules that
prevent its circumvention are no longer needed.
39. The Commission therefore modifies section 54.513(d) of the
Commission's rules, effective for funding year 2021, to allow districts
and library systems to transfer equipment between schools within a
district and libraries within a system. Importantly, transferors no
longer must notify USAC of the transfer, but both the transferor and
recipient must maintain detailed records documenting the transfer and
the reason for the transfer for a period of five years as required by
the Commission's rules. Additionally, as a reminder to all applicants,
under section 54.516(a) of the Commission's rules, schools, libraries,
and consortia are required to maintain asset and inventory records of
equipment purchased and the actual locations of such equipment for a
period of 10 years after purchase.
40. Non-Instructional Facilities. In the 2019 Category Two Notice,
the Commission noted that the cost allocation of the shared costs of a
piece of equipment located in a non-instructional facility could be
more easily handled in a district-wide category two budget because the
district-wide approach relieves the burden of allocating costs among
the budgets of eligible entities. Under the per-entity budget rules,
district-wide applicants requesting funding for equipment that would be
shared district-wide but housed in a non-instructional facility
determined each school's use of the shared equipment as well as the
non-instructional building's use of the shared equipment, deducted the
cost of the non-instructional building's use of the shared equipment,
and submitted funding requests from each school for each portion of
eligible funding. USAC then reviewed each funding request to ensure
that funding is only provided for equipment used by eligible entities.
Under the district-wide budget approach adopted in this document,
applicants will only need to deduct the cost of the non-instructional
facility's use of the shared network equipment.
41. In response to the 2019 Category Two Notice, commenters agreed
that cost allocation of the use of shared equipment is burdensome, and
requested that the Commission allow all buildings associated within a
district or library system, including non-instructional facilities, to
qualify for category two funding support because the category two
budget places a ceiling on the amount that can be spent on category two
services. The Commission declines to modify its rules regarding whether
non-instructional facilities or the administrative buildings of
libraries qualify for category two funding support. The district-wide
budgets the Commission adopts in this document will reduce the
administrative burden on applicants that use non-instructional
facilities or other administrative buildings to house network equipment
shared district-wide and will make it easier for USAC to review such
requests by eliminating the need to allocate among eligible entities in
a district. However, the Commission is not persuaded that the
administrative burden associated with deducting the cost of the non-
instructional building's use of shared network equipment warrants
eliminating a rule designed to ensure that E-Rate support is only
provided to eligible entities for eligible purposes. The relatively
simple task of subtracting the cost of the non-instructional facility's
use of the shared network element is unlikely to significantly burden
either applicants or USAC. Accordingly, the Commission will continue to
require applicants to deduct the cost of non-instructional facilities'
use of shared equipment from their requests for E-Rate support, as
required by the current rules.
42. In this document, the Commission extends the five-year test
period for the category two budget approach through funding year 2020
and provide a prorated portion of category two funding for each
applicant for that additional year. This approach ensures a smooth
transition to the permanent rules effective in 2021 while providing
applicants with sufficient funding to deploy internal connections in
funding year 2020.
43. In the 2019 Category Two Notice, the Commission sought comment
on using funding year 2020 as a bridge year between the five-year test
period and the permanent extension of the category two budget approach.
The Commission has weighed the costs and benefits of attempting to
allow applicants to begin requesting E-Rate program support for
category two services under these permanent rules--including the
district-wide approach it adopts in this document--in funding year 2020
and finds that the costs of doing so far outweigh the benefits. In
particular, implementing new rules for funding year 2020 would likely
cause delays in funding commitments, and USAC would likely need to
conduct manual application reviews to accommodate any rule changes. The
Commission therefore adopts rules extending the five-year test period
by one additional year and provide prorated E-Rate support for funding
year 2020 while the Bureau and USAC take the necessary steps to ensure
effective implementation of the permanent rules beginning funding year
2021. By extending the test period into funding year 2020, and making
additional category two support available during that funding year, the
Commission provides needed certainty and predictability to E-Rate
participants while allowing the Commission and USAC adequate time to
implement and ensure a smooth transition to the permanent rules the
Commission adopts in this document.
44. First, to implement the permanent rules, the Commission
recognizes that they and USAC will need time to update (1) E-Rate
program forms in compliance with the Paperwork Reduction Act; (2)
USAC's IT systems, including the E-Rate Productivity Center (EPC), to
track the district-wide and library system-wide budgets and ensure
funding requests that are over budget are reduced; and (3)
administrative processes, such as Program Integrity Assurance
procedures, to ensure consistent review for all five years of the
funding cycle. Implementing the Commission's new rules as quickly as
possible will, at best, take them into next year before completion.
While SECA and SHLB suggest that USAC perform manual workarounds,
including performing manual calculations of district-wide and library-
wide budgets, the Commission disagrees. Doing so would require USAC to
make such calculations for approximately 50,000 schools. Moreover,
manual review of applications in the first year of a five-year funding
cycle introduces risks of improper payments and the potential
[[Page 70033]]
inability for USAC to properly track the category two budgets until the
end of the funding cycle. Because these are fixed five-year budgets,
any error that occurs in the first funding year has the potential to
impact multiple funding years. Such an outcome would introduce further
complexity and thus directly contradict the Commission's overall goal
to simplify and streamline the category two budget approach.
45. Moreover, implementation of new rules has a strong potential to
significantly delay the application filing window for funding year
2020. Despite the statements from some commenters that this months-long
delay would be preferable to the community, the Commission finds that
the potential harms, including delaying commitments for category one
funding requests--which, this funding year, represented nearly $2
billion's worth of high-speed broadband service and equipment--are
unacceptable. A delay in funding commitments would create delays in the
deployment of E-Rate supported services, to the detriment of schools
and libraries.
46. The Commission also is unpersuaded by arguments that extending
the five-year test period will cause more confusion than rushing the
implementation of the permanent rules with insufficient outreach to
stakeholders. Instead, to give certainty to applicants in advance of
the expected opening of the filing window for funding year 2020 and to
smooth the transition to new, permanent rules, the Commission finds
that the public interest would be served by an extension of the test
period through funding year 2020. Since funding year 2015, over 90,000
schools and 4,900 libraries have used category two support to deploy
Wi-Fi networks for the benefit of students and library patrons. The
Commission largely makes no changes to how applicants should apply for
support for category two services in funding year 2020, allowing
applicants to move forward using their existing knowledge of the
category two budget approach and providing an amount of funding
equivalent to a single funding year's budget to aid applicants whose
budgets would have ended in funding year 2019. The Commission also sets
its clear guidance on the budget calculations for funding year 2021,
allowing applicants to begin much-needed technology planning.
47. The Commission finds that the benefits of clear rules for
funding year 2021 strongly outweigh the costs and risks associated with
new rules implemented without adequate outreach to applicants and
subsequent delays in funding commitments. By using funding year 2020 as
a bridge to a permanent set of rules for category two services, the
Commission will be able to ensure that the permanent rule changes are
carefully and thoroughly implemented and administered, and that
applicants are given a smooth transition period and notice for planning
technology changes or upgrades. As a result of the Commission's
extension of the test period, all applicants will continue to be able
to request category two support under the existing category two budget
approach in funding year 2020, and the Commission will not revert back
to the two-in-five rules for any applicants.
48. The Commission provides a prorated portion of category two
funding to all applicants in funding year 2020, which it will treat as
a sixth year of the test period. In the 2014 First E-Rate Order, the
Commission established a pre-discount category two budget for schools
of $150 per student over five funding years, or 20% of the total
funding per student annually. Accordingly, in extending the five-year
test period by an additional year, the Commission provides an
additional 20% in funding to schools and libraries, as well as to the
funding floor. The Commission directs the Bureau to release updates to
the category two budget multipliers and funding floor for the test
period, adjusted for inflation and proration and rounded to the nearest
cent, consistent with the Order, within 15 days of publication of the
Order in the Federal Register. As in previous years of the test period,
the available category two funding that will be available to applicants
in funding year 2020 will be the updated budget multipliers and funding
floor that the Bureau calculates minus the category two funding that
applicants spent earlier in the test period.\6\
---------------------------------------------------------------------------
\6\ The Commission notes that this same calculation is
applicable to applicants whose category two budget was reset based
on relief the Commission granted in the 2017 Hurricane Relief Order,
82 FR 55767, November 24, 2017.
---------------------------------------------------------------------------
49. This action will ensure that all applicants, including those
who have exhausted their category two budgets or completed their five-
year budget cycles, can request category two support in funding year
2020. While ALA argued against making additional funds available during
a bridge year, the Commission finds providing support for this one
funding year more equitable and appropriate than denying funding to
applicants that in good faith managed their five-year budgets over a
five-year period (and did not anticipate a sixth year).
50. Moreover, this approach is consistent with the Commission's
intent in the 2014 First E-Rate Order to provide approximately $1
billion per year in category two support to ensure applicants had
access to funding for internal connections on a predictable,
consistent, and equitable basis. Demand for category two services has
tracked closely to this initial target. By providing a prorated portion
of funding for funding year 2020, the Commission can make available
approximately $1 billion for category two services, providing
applicants with funding that may be needed to maintain their local area
networks while the Commission transitions to permanent category two
rules. The Commission also finds that providing a prorated portion of
category two funding to all applicants treats all entities equitably
because every entity will be eligible for the same amount of category
two support during the six-year test period. Finally, this approach
provides both applicants and USAC with a single calculation for all
entities, which simplifies the administration in funding year 2020 for
requesting and reviewing category two funding requests and reduces the
chances of overpayments.
51. The Commission finds that good cause exists here to make those
portions of the Order that codify the permanent eligibility of managed
internal broadband services, caching, and basic maintenance of internal
connections for support in funding year 2020 and beyond and the
proration of budget multipliers and the funding floor for funding year
2020 effective upon publication in the Federal Register. A rule may be
made effective prior to thirty days from publication in the Federal
Register for good cause found and published with the rule. Here, to
ensure that applicants have sufficient notice of the services that will
be eligible and the prorated funding that will be available to them
before they file their funding year 2020 applications, it is necessary
to implement those portions of the Order as soon as possible following
release of the Order. The filing window for E-Rate funding applications
typically opens in mid-January each year to ensure adequate time for
USAC to process such applications and issue funding commitments or
denials. Therefore, in light of the need to enable the release of the
Eligible Services List and notification of budget multipliers and the
funding floor with sufficient time to make applicants aware of what
services are eligible and the amount of support available before the
opening of the filing
[[Page 70034]]
window, the Commission finds that good cause exists to make the
portions of the Order addressing eligible services and proration of
budget multipliers and the funding floor for funding year 2020
effective upon publication in the Federal Register. Moreover, making
the eligibility of managed internal broadband service, caching, and
basic maintenance of internal connections and the budget multipliers
and a funding floor for funding year 2020 effective immediately will
not impose any implementation burden on applicants given that these
services were eligible and budget multipliers and a funding floor were
used during the initial five-year test period.
52. In addition, to ensure that the application filing window for
funding year 2020 is not unduly delayed by implementation of the
Commission's decisions herein, it waives the requirement in section
54.502(d) of the Commission's rules that the Eligible Services List be
released at least 60 days prior to the opening of the application
filing window. Section 1.3 of the Commission's rules allows the
Commission to waive a rule on its own motion for good cause shown. The
Bureau may find it necessary to release the Eligible Services List less
than 60 days before the opening of the application filing window to
ensure that the filing window opens with enough time to allow USAC to
process applications for funding year 2020. Applicants will benefit
from this waiver because it will help to ensure that their applications
are processed in a timely manner. The Commission finds that the
adoption of the Order at this time and its impact on a number of
eligible services constitute special circumstances that warrant waiver
of the 60-day requirement, and that doing so is in the public interest.
III. Procedural Matters
A. Paperwork Reduction Analysis
53. This document contains new and modified information collection
requirements subject to the Paperwork Reduction Act of 1995 (PRA),
Public Law 104-13. It will be submitted to the Office of Management and
Budget (OMB) for review under section 3507(d) of the PRA. OMB, the
general public, and other Federal agencies will be invited to comment
on the new and modified information collection requirements contained
in the proceeding. In addition, the Commission notes that pursuant to
the Small Business Paperwork Relief Act of 2002, it previously sought
specific comment on how the Commission might ``further reduce the
information collection burden for small business concerns with fewer
than 25 employees.''
B. Congressional Review Act
54. The Commission has determined, and the Administrator of the
Office of Information and Regulatory Affairs, Office of Management and
Budget, concurs that this rule is ``non-major'' under the Congressional
Review Act, 5 U.S.C. 804(2). The Commission will send a copy of the
Order to Congress and the Government Accountability Office pursuant to
5 U.S.C. 801(a)(1)(A).
55. As required by the Regulatory Flexibility Act of 1980 (RFA), as
amended, the Federal Communications Commission (Commission) included an
Initial Regulatory Flexibility Analysis (IRFA) of the possible
significant economic impact on a substantial number of small entities
by the policies and rules proposed in the 2019 Category Two Notice in
WC Docket No. 13-184. The Commission sought written public comment on
the proposals in the 2019 Category Two Notice, including comment on the
IRFA. The Commission did not receive any relevant comments in response
to the IRFA. The Final Regulatory Flexibility Analysis (FRFA) conforms
to the RFA.
56. The Commission is required by Section 254 of the Communications
Act of 1934, as amended, to promulgate rules to implement the universal
service provisions of Section 254. On May 8, 1997, the Commission
adopted rules to reform its system of universal service support
mechanisms so that universal service is preserved and advanced as
markets move toward competition. Specifically, under the schools and
libraries universal service support mechanism, also known as the E-Rate
program, eligible schools, libraries, and consortia that include
eligible schools and libraries may receive discounts for eligible
telecommunications services, internet access, and internal connections.
57. Taking steps to close the digital divide is a top priority for
the Commission. The E-Rate program provides a vital source of support
to schools and libraries, ensuring that students and library patrons
across the nation have access to high-speed broadband and essential
communications services. In the Order, the Commission permanently
extends the category two budget approach and adopts several proposals
that will reduce the burden on small entities, such as a move to
district-wide or library-system wide budgets and fixed budget cycles to
allow careful planning from E-Rate applicants. The Commission also
extends the five-year test period for the category two budget approach
for a sixth year to include funding year 2020 to provide funding for
applicants in funding year 2020 while the Commission and USAC implement
permanent rules for funding year 2021. During this funding year, with
limited exceptions, the existing category two budget rules will
continue to be in effect. Permanent rules for the category two budget
approach to go into effect in funding year 2021.
58. The RFA directs agencies to provide a description of and, where
feasible, an estimate of the number of small entities that may be
affected by the rules, as adopted. The RFA generally defines the term
``small entity'' as having the same meaning as the terms ``small
business,'' ``small organization,'' and ``small governmental
jurisdiction.'' In addition, the term ``small business'' has the same
meaning as the term ``small business concern'' under the Small Business
Act. A small business concern is one that: (1) Is independently owned
and operated; (2) is not dominant in its field of operation; and (3)
satisfies any additional criteria established by the Small Business
Administration (SBA).
59. Small Businesses, Small Organizations, Small Governmental
Jurisdictions. The Commission's actions, over time, may affect small
entities that are not easily categorized at present. The Commission
therefore describes here, at the outset, three broad groups of small
entities that could be directly affected herein. First, while there are
industry specific size standards for small businesses that are used in
the regulatory flexibility analysis, according to data from the SBA's
Office of Advocacy, in general a small business is an independent
business having fewer than 500 employees. These types of small
businesses represent 99.9% of all businesses in the United States which
translates to 28.8 million businesses.
60. Next, the type of small entity described as a ``small
organization'' is generally ``any not-for-profit enterprise which is
independently owned and operated and is not dominant in its field.''
Nationwide, as of August 2016, there were approximately 356,494 small
organizations based on registration and tax data filed by nonprofits
with the Internal Revenue Service (IRS).
61. Finally, the small entity described as a ``small governmental
jurisdiction'' is defined generally as ``governments of cities,
counties, towns, townships, villages, school districts, or special
districts, with a population of less than fifty thousand.'' U.S. Census
Bureau
[[Page 70035]]
data from the 2012 Census of Governments indicate that there were
90,056 local governmental jurisdictions consisting of general purpose
governments and special purpose governments in the United States. Of
this number there were 37,132 General purpose governments (county,
municipal and town or township) with populations of less than 50,000
and 12,184 Special purpose governments (independent school districts
and special districts) with populations of less than 50,000. The 2012
U.S. Census Bureau data for most types of governments in the local
government category show that the majority of these governments have
populations of less than 50,000. Based on this data the Commission
estimates that at least 49,316 local government jurisdictions fall in
the category of ``small governmental jurisdictions.''
62. The small entities that may be affected are Schools and
Libraries, Telecommunications Service Providers, internet Service
Providers (ISPs), and Vendors of Internal Connections.
63. The Commission expects that the rules adopted in the Order will
result in modified reporting, recordkeeping, or other compliance
requirements for small or large entities. The Order takes two major
actions. First, it permanently extends the existing category two budget
approach for all entities, while adopting a number of steps to simplify
how applications for category two services are filed, reviewed, and
ultimately invoiced beginning in funding year 2021. These changes will
result in modifications to information collections that decrease the
compliance costs for small entities. And, second, it adopts rules
extending the current five-year funding cycle for one additional year
into for funding year 2020 to ensure that support for category two
services is available and funding for other services are not delayed.
For the funding year 2020 rules, both small and large entities will
apply for category two funding in the same manner as in previous years
with no changes to reporting, recordkeeping, or other compliance
requirements. The Commission does not believe that small entities will
have to hire attorneys, engineers, consultants, or other professionals
to comply.
64. The RFA requires an agency to describe any significant,
specifically small business, alternatives that it has considered in
reaching its proposed approach, which may include the following four
alternatives (among others): ``(1) the establishment of differing
compliance or reporting requirements or timetables that take into
account the resources available to small entities; (2) the
clarification, consolidation, or simplification of compliance and
reporting requirements under the rule for such small entities; (3) the
use of performance rather than design standards; and (4) an exemption
from coverage of the rule, or any part thereof, for such small
entities.''
65. In the Order, the Commission has taken steps to minimize the
economic impact on small entities with the rule changes that it has
adopted by permanently extending the category two budget approach and
working to simplify the administration of the budgets. In the
following, the Commission outlines many of the adopted simplifications
that will aid small entities in compliance.
66. District-Wide or Library System-Wide Budgets. The Commission
adopts a rule providing that school districts and library systems shall
calculate their budgets for the entire district or system, allowing
applicants to use funds efficiently at the schools and libraries that
need the funding. This dramatically reduces the requirements for the
application review process, including, but not limited to, eliminating
reporting of part-time students, eliminating complicated cost
allocations for equipment that is shared by members of a district or
system, and overall simplification of the application process from
start to finish.
67. Modification of the Equipment Transfer Rule. In addition to the
district- and system-wide budgets, the Commission amends its rule
allowing districts and systems to transfer equipment among their own
schools and libraries and eliminating the need to report such transfers
to USAC. This removes a reporting requirement for all applicants, but
keeps rules in place that requires schools and libraries to maintain
asset inventories of all E-Rate supported equipment.
68. Modification of the Library Budget Multiplier. The Commission
amends its rules to have a single library budget multiplier. Currently,
there are two multipliers, depending on the urban status of the
library. A single multiplier allows for a simpler calculation of the
library budgets, streamlining the application and its review.
69. Increase of the Funding Floor. The Commission adopts an
increase in the funding floor, which is aimed at encouraging
participation by small entities. Many commenters argued that the burden
of program compliance outweighed the benefit of receiving the current
funding floor, which was also inadequate to meet their needs.
Increasing the funding floor and simplifying the category two budget
approach will allow more small entities to participate.
70. Simplification of the Budget Calculation. The Commission adopts
fixed, five-year budgets that refresh every five years, eliminating the
need for applicants and USAC to calculate the budgets annually with a
series of different variables including inflation, changing student
counts, and funding years at issue. This dramatically decreases the
burden on applicants to calculate the budget and apply for E-Rate
support.
71. The Order also extends the five-year test period for the
category two budget approach into a sixth year and sets out the budget
calculation in the Order to simplify how to calculate the amount of
funding available to applicants in advance of the funding year 2020
filing window. While stakeholders advocated for a faster transition to
the new rules as an alternative to rules for one funding year, the
Commission finds that this approach causes the least disruption to the
overall program and provides it and USAC with sufficient time and
resources to successfully implement the many permanent changes the
Commission adopts for funding year 2021. The Commission takes steps to
minimize the burden of the funding year 2020 rules by simplifying the
budget calculation slightly and otherwise maintaining current category
two budget rules. As a result, there is no additional burden or cost to
small entities because the program rules that are familiar to them are
unchanged. Further, absent the rule changes in the Order, the category
two budget rules would begin to sunset in funding year 2020, meaning
that small entities would have to navigate two sets of rules. The rule
changes in the Order prevent this sunsetting from taking place, thus
preventing a potential source of burden and cost to small entities.
IV. Ordering Clauses
72. Accordingly, it is ordered that, pursuant to the authority
contained in sections 1 through 4, 201 through 202, 254, 303(r), and
403 of the Communications Act of 1934, as amended, 47 U.S.C. 151-154,
201-202, 254, 303(r), and 403, the Order is adopted, and Sec.
54.502(c) of the Commission's rules, 47 CFR 54.502(c), is amended as
set forth in the following, and such rule amendments shall be effective
thirty (30) days after the publication of the Order in the Federal
Register, except amendments to the budget multipliers and funding
floor, which shall be effective immediately and except to the extent
expressly addressed in the following.
[[Page 70036]]
73. It is further ordered, that pursuant to the authority contained
in sections 1 through 4, 201 through 202, 254, 303(r), and 403 of the
Communications Act of 1934, as amended, 47 U.S.C. 151-154, 201-202,
254, 303(r), and 403, Sec. Sec. 54.502(d)-(e) and 54.513(d) of the
Commission's rules, 47 CFR 54.502(d)-(e) and 54.513(d), are amended as
set forth in the following, effective upon announcement of approval by
OMB under the Paperwork Reduction Act. The Commission directs the
Bureau to announce the effective date for these information collections
in a document published in the Federal Register announcing OMB
approval.
74. It is further ordered that, pursuant to the authority contained
in sections 1 through 4, 201 through 202, 254, 303(r), and 403 of the
Communications Act of 1934, as amended, 47 U.S.C. 151-154, 201-202,
254, 303(r), and 403, sections of the Order addressing eligible
services and proration of budgets for funding year 2020 in paragraphs
35, 36, and 48 shall become effective immediately upon publication of
the Order in the Federal Register, pursuant to 5 U.S.C. 553(d)(3); and
47 CFR 1.427(b).
75. It is further ordered, that pursuant to the authority contained
in sections 1 through 4 and 254 of the Communications Act of 1934, as
amended, 47 U.S.C. 151-154 and 254, and pursuant to the authority in
Sec. 1.3 of the Commission's rules, 47 CFR 1.3, that Sec. 54.502(d),
47 CFR 54.502(d) is waived, and such waiver shall become effective upon
release.
List of Subjects in 47 CFR Part 54
Communications common carriers, Health facilities, Infants and
children, Internet, Libraries, Reporting and recordkeeping
requirements, Schools, Telecommunications, Telephone.
Federal Communications Commission.
Marlene Dortch,
Secretary.
Final Rules
For the reasons discussed in the preamble, the Federal
Communications Commission amends 47 CFR part 54 as follows:
PART 54--UNIVERSAL SERVICE
Subpart F--Universal Service Support for Schools and Libraries
0
1. The authority citation for part 54 continues to read as follows:
Authority: Sections 1, 4(i), 5, 201, 205, 214, 219, 220, 254,
303(r), and 403 of the Communications Act of 1934, as amended, and
section 706 of the Communications Act of 1996, as amended; 47 U.S.C.
151, 154(i), 155, 201 205, 214, 219, 220, 254, 303(r), 403, and 1302
unless otherwise noted.
0
2. Amend Sec. 54.502 by revising paragraph (c) and redesignating
paragraph (d) as paragraph (e) and adding new paragraph (d) to read as
follows:
Sec. 54.502 Eligible services.
* * * * *
(c) Funding year 2020. Libraries, schools, or school districts with
schools that receive funding for category two services in funding year
2020 shall be eligible for support for category two services pursuant
to paragraphs (c)(1) through (6) of this section.
(1) Six-year funding cycle. Each eligible school or library shall
be eligible for a budgeted amount of support for category two services
over a six-year funding cycle. Each school or library shall be eligible
for the total available budget less the pre-discount amount of any
support received for category two services in the prior funding years
of that school's or library's six-year funding cycle.
(2) School budget. Each eligible school shall be eligible for
support for category two services up to a pre-discount price of $150
plus an additional prorated 20% (adjusted for inflation dating back to
funding year 2015) over six funding years that will be completed at the
end of funding year 2020. Applicants shall provide the student count
per school, calculated at the time that the discount is calculated each
funding year. New schools may estimate the number of students but shall
repay any support provided in excess of the maximum budget based on
student enrollment the following funding year.
(3) Library budget. Each eligible library located within the
Institute of Museum and Library Services locale codes of ``11--City,
Large,'' defined as a territory inside an urbanized area and inside a
principal city with a population of 250,000 or more, ``12--City,
Midsize,'' defined as a territory inside an urbanized area and inside a
principal city with a population less than 250,000 and greater than or
equal to 100,000, or ``21--Suburb, Large,'' defined as a territory
outside a principal city and inside an urbanized area with population
of 250,000 or more, shall be eligible for support for category two
services, up to a pre-discount price of $5.00 per square foot plus an
additional prorated 20% (adjusted for inflation dating back to funding
year 2015) over six funding years that will be completed at the end of
funding year 2020. All other eligible libraries shall be eligible for
support for category two services, up to a pre-discount price of $2.30
per square foot plus an additional prorated 20% (adjusted for inflation
dating back to funding year 2015) over a six-year funding cycle that
will be completed at the end of funding year 2020. Libraries shall
provide the total area for all floors, in square feet, of each library
outlet separately, including all areas enclosed by the outer walls of
the library outlet and occupied by the library, including those areas
off-limits to the public.
(4) Funding floor. Each eligible school and library will be
eligible for support for category two services of at least a pre-
discount price of $9,200 plus an additional prorated 20% (adjusted for
inflation dating back to funding year 2015) over six funding years that
will be completed at the end of funding year 2020.
(5) Requests. Applicants shall request support for category two
services for each school or library based on the number of students per
school building or square footage per library building. Category two
funding for a school or library may not be used for another school or
library. The costs for category two services shared by multiple
eligible entities shall be divided reasonably between each of the
entities for which support is sought in that funding year.
(6) Non-instructional buildings. Support is not available for
category two services provided to or within non-instructional school
buildings or separate library administrative buildings unless those
category two services are essential for the effective transport of
information to or within one or more instructional buildings of a
school or non-administrative library buildings, or the Commission has
found that the use of those services meets the definition of
educational purpose, as defined in Sec. 54.500. When applying for
category two support for eligible services to a non-instructional
school building or library administrative building, the applicant shall
allocate the cost of providing services to one or more of the eligible
school or library buildings that benefit from those services being
provided.
(d) Funding year 2021 and beyond. Schools, school districts,
libraries, and library systems shall be eligible for support for
category two services pursuant to the five-year budgets described in
paragraphs (d)(1) through (6) of this section.
(1) Fixed five-year funding cycle. Beginning in funding year 2021,
each eligible school, school district, library, or library system shall
be eligible for a budgeted amount of pre-discount support for category
two services over a five-year funding cycle that will reset in
[[Page 70037]]
funding year 2026 and subsequently, after every five funding years.
Each school, school district, library, or library system shall be
eligible for the total available budget less the pre-discount amount of
any support received for category two services in the prior funding
years of that fixed five-year funding cycle.
(2) School and school district multipliers. Each eligible school
district and schools operating independently of a school district shall
be eligible for support for category two services up to a pre-discount
price of $167 per student over a five-year funding cycle. The amount of
support will be calculated at the time that the discount is calculated
in the first funding year of the five-year cycle in which the applicant
requests category two support, unless the school or school district
elects to seek additional program support using updated enrollment
numbers in subsequent funding years in the five-year cycle. School
districts shall provide the total number of students within the school
district. Independent charter schools, private schools, and other
eligible educational facilities that operate under the control of a
central administrative agency shall provide the total number of
students under the control of that agency. Schools that are not
affiliated financially or operationally with a school district or
central administrative agency shall provide the total number of
students in the school.
(3) Library and library system multipliers. Library systems and
libraries operating independently of a system shall be eligible for
support for category two services, up to a pre-discount price of $4.50
per square foot over a five-year funding cycle. The amount of support
will be calculated at the time that the discount is calculated in the
first funding year of the five-year cycle in which the applicant
requests category two support, unless the library or library system
elects to seek additional program support using updated square footage
in subsequent funding years in the five-year cycle. Library systems
shall provide the total area for all floors, in square feet, of all of
its library outlets, including all areas enclosed by the outer walls of
the library outlet and occupied by the library, including those areas
off-limits to the public. Independent libraries shall provide the total
area for all floors, in square feet, of all areas enclosed by the outer
walls of the library outlet and occupied by the library, including
those areas off-limits to the public.
(4) Funding floor. Each eligible school and library shall be
eligible for support for category two services of at least a pre-
discount price of $25,000 over five funding years.
(5) Calculation increase. Before funding year 2026 and every
subsequent five-year funding cycle, the Wireline Competition Bureau
shall announce the multipliers and funding floor as adjusted for
inflation at least 60 days before the start of the filing window for
the next five-year funding cycle. The Bureau shall use the last four
quarters of data on the Gross Domestic Product Chain-type Price Index
(GDP-CPI) compared with the equivalent quarters from the beginning of
the five-year funding cycle. The increase shall be rounded to the
nearest 0.1 percent and shall be used to calculate the category two
budget multipliers and funding floor for that five-year funding cycle.
The multipliers and funding floor shall be rounded to the nearest cent.
(6) Non-instructional buildings. Support is not available for
category two services provided to or within non-instructional school
buildings or separate library administrative buildings unless those
category two services are essential for the effective transport of
information to or within one or more instructional buildings of a
school or non-administrative library buildings, or the Commission has
found that the use of those services meets the definition of
educational purpose, as defined in Sec. 54.500. When applying for
category two support for eligible services to a non-instructional
school building or library administrative building, the applicant shall
deduct the cost of the non-instructional building's use of the category
two services or equipment.
(e) Eligible services list process. The Administrator shall submit
by March 30 of each year a draft list of services eligible for support,
based on the Commission's rules for the following funding year. The
Wireline Competition Bureau will issue a Public Notice seeking comment
on the Administrator's proposed eligible services list. The final list
of services eligible for support will be released at least 60 days
prior to the opening of the application filing window for the following
funding year.
0
3. Amend Sec. 54.513 by revising paragraph (d) to read as follows:
Sec. 54.513 Resale and transfer of services.
* * * * *
(d) Eligible services and equipment components of eligible services
purchased at a discount under this subpart shall not be transferred,
with or without consideration of money or any other thing of value, for
a period of three years after purchase, except that eligible services
and equipment components of eligible services may be transferred to
another eligible school or library in the event that the particular
location where the service originally was received is permanently or
temporarily closed, or is part of the same eligible school district or
library system as the location receiving the eligible services or
equipment components of eligible services. If an eligible service or
equipment component of a service is transferred pursuant to this
paragraph, both the transferor and recipient must maintain detailed
records documenting the transfer and the reason for the transfer for a
period of five years.
[FR Doc. 2019-27219 Filed 12-19-19; 8:45 am]
BILLING CODE 6712-01-P