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E-Rate Frequently Asked Questions
 Product and Service Eligibility1. On-Premise Priority 1 Equipment Due to the lower priority for funding internal connections, some applicants are not able to obtain discounts for equipment located at their site. Is there a way for applicants to receive support for such components within the Priority 1 categories of service (telecommunications services and Internet access)? In limited instances, service providers may install equipment on the premises of schools or libraries as part of their provision of eligible telecommunications services or Internet access. Such equipment may be considered as part of the provision of "end-to-end" telecommunications services or Internet access (and not as internal connections), but only if the applicant demonstrates that it meets certain eligibility criteria for this service. Further information is provided in On-Premise Priority 1 Equipment. If an applicant owns a router, can an end-to-end service with on-premise equipment include the lease of an additional circuit card added to the router as a component of the end-to-end service? Yes, a demarcation between Priority 1 service and internal connections can occur "inside" a component, if the demarcation can be clearly delineated. Such a delineation could occur with a separate circuit card that is part of a Priority 1 leased end-to-end service, installed in a router that is a part of the applicant's internal connections equipment. The circuit card could not be used by the applicant for any purpose other than the specific end-to-end service. Other conditions of end-to-end service discussed in On-Premise Priority 1 Equipment would also apply. For an end-to-end service with on-premise equipment, is it acceptable for a leasing company to provide the components to the applicant? No. One of the requirements for on-premise equipment that is used for an end-to-end Priority 1 service is that the equipment must be provided by the same service provider that provides the service. A contract between the applicant and a third party for provision of equipment is inconsistent with that requirement. Can end-user components such as cameras and monitors be included in an end-to-end service with on-premise equipment? No. Including cameras and monitors in the service package would move the service from a transmission conduit (e.g., telecommunications service) to a service that includes creation and display of information. The end-to-end service must meet the eligibility requirements for the category of service proposed, either telecommunications services or Internet access. One of the requirements for an end-to-end service with on-premise equipment is that the applicant cannot have a contractual right to exclusive use of the equipment. Are you saying that the service provider could allow other customers to utilize equipment at the applicant site? Yes. Service providers can choose to locate their own equipment at the applicant's site, if certain conditions are met. One condition is that the service provider should be able to make its equipment available on a shared basis to other customers. The applicant may be the only party accessing the equipment, but there can be no contractual right to such exclusive access if the lease cost of equipment is to be considered part of end-to-end Priority 1 service. How should applicants apply for on-premise equipment for end-to-end service? Equipment located at the applicant's site is presumed to be internal connections, but this presumption can be rebutted. To do so, applicants should submit, as part of the Form 471 filing, clear information that fully describes the funding request. See Item 21 Attachments for Form 471, for further guidance. Requests must make sense as an end-to-end service, and the clearest way to make this case may be to include the request in a single funding request. Multiple funding requests are acceptable if clear information is provided that enables USAC to understand the full end-to-end service requested. In some cases, multiple funding requests can be advantageous. The multiple funding requests must be provided in the same Form 471 application. If the on-premise components do not meet the requirements for an end-to-end service as Priority 1, they are evaluated as internal connections. In some circumstances, telecommunications or Internet access services contained in the same funding request can be denied, even if these telecommunications or Internet access services could have been approved if they were in a different funding request. Thus, submitting the "off-premise" Priority 1 components in a separate funding request from on-premise Priority 1 components can be advantageous in the event that the on-premise components do not meet the Priority 1 requirements. See Service Category Adjustments. Should internal connections be included in the Form 470 application if the proposed on-premise components may not be acceptable as a part of an end-to-end Priority 1 service? What about the Form 471? If on-premise components do not meet the requirements to be part of an end-to-end Priority 1 service, USAC will move them to internal connections and evaluate them for funding in that category of service. Therefore, specifying on the Form 470 that internal connections may be obtained would be important in the event that the components are moved. For the Form 471, applicants should NOT request funding for the same components twice, once as Priority 1 and once as internal connections. The Wide Area Network (WAN) Fact Sheet indicates that up-front capital costs for Priority 1 services greater than $500,000 must be amortized over at least three years. How are such requests evaluated when they include on-premise components as part of the Priority 1 service? For requests that include on-premise Priority 1 equipment, first an evaluation is performed to determine if the requirements for a Priority 1 end-to-end service are met. Then the application is evaluated to determine if non-recurring costs are greater than $500,000.
The $500,000 threshold is evaluated on the basis of the same service provider, same applicant, and same "service package" (e.g., videoconferencing, fiber installation, and wireless WAN). USAC could evaluate more than a single funding request or even more than a single application.
My telecommunications services provider makes available a scanning service that can protect my sites from viruses and/or provide additional security measures. Is this eligible?
No. The FCC defines telecommunications as "the transmission, between or among points specified by the user, of information of the user's choosing, without change in the form or content of the information as sent and received." Since the scanning service does not fall within this definition, it is not eligible as telecommunications services
"Dark fiber" service is not eligible in Funding Year 2004. If an applicant has a contract that includes dark fiber, may the applicant trade-in components that it owns to the service provider so that the service provider can use these components as a part of its provision of a lighted fiber service? Yes, but care must be taken to ensure compliance with FCC rules: "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. The applicant may not use the credit for the trade-in to pay its non-discounted portion of the services. Such a contract modification would be deemed a minor contract modification under section 54.500(g) of the Commission's rules if this was within the scope of the original contract and the change has no effect or negligible effect on price, quantity, quality, or delivery under the original contract. For instance, such a change could fit within the minor contract modification rule if the original contract was for the provision of high bandwidth transmission capability." (See Third Report and Order, FCC 03-323, released December 23, 2003, para. 76, footnote 155.) If the equipment being traded-in was purchased with Universal Service Fund support, there are additional requirements for the trade-in that are described in the section below labeled "Transfer or Trade-in of Components." Can a service provider convert a dark fiber service to an eligible lighted fiber service by installing a copper-to-fiber converter at applicant sites? (A copper-to-fiber converter is also known as a "TX-to-FX converter" and sometimes as a "GBIC.") A copper-to-fiber converter that provides electronics that modulate the fiber cable can meet the definition of optical equipment that is the single basic terminating component of a lighted fiber service as described below:
"[I]t is appropriate to provide Priority One 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 an end-to-end telecommunications or Internet access service. [The FCC] reach[es] that conclusion even though the optical equipment on the customers' end, as a technical matter, is dedicated to the customer's sole use." (See Third Report and Order, FCC 03-323, released December 23, 2003, para. 49.)
Can an applicant wire its facilities for the technologies and requirements it anticipates for the future, or must it limit cabling only to the technologies and amount of end-user equipment anticipated in the current funding year?
A proactive approach in designing infrastructure for future requirements can be a part of an acceptable system design, because such an approach can provide the most cost-effective overall implementation. However, USAC will not fund requests that are excessive when evaluated against current applicant resources. Applicants are advised to maintain clear information about implementation strategy in their technology plan and to provide, if requested, a full showing that sufficient resources are on hand, or planned and budgeted over the next few years (e.g., end-user workstations, staff training, software, maintenance plans) to utilize the infrastructure proposed.
Assume that a school district obtains telecommunications services from a service provider, and the school district then bills individual schools for the service and adds an administrative cost to these bills to cover their overhead expense. Is the administrative cost eligible for support?
No. Applicants obtain discounts for telecommunications services charges from eligible telecommunications carriers. Administrative fees imposed on schools or libraries by other government agencies do not fall within this definition.
What are the restrictions, if any, about selling or transferring components obtained with USF support? Can such equipment be traded-in for new components? Equipment purchased with USF support may not be transferred for anything of value at any time. Such equipment may be traded in, if the trade-in amount is applied to the purchase of new eligible equipment and the pre-discount amount on the Form 471 is reduced by the trade-in amount. Can an applicant use a credit obtained from a trade-in of components as a way to pay part or all of the non-discounted portion of new products or services? Equipment purchased with USF support may be traded-in, if the trade-in amount is applied to the purchase of new eligible equipment, and the pre-discount amount on the Form 471 is reduced by the trade-in amount. Thus, a trade-in of equipment purchased with USF support cannot be used toward payment of the applicant's non-discounted share. See also Transfers of Equipment. On the other hand, if equipment was not purchased with USF support, the fair market trade-in value may be used toward payment of the non-discounted share. The amount credited toward the non-discounted share must be the fair market value or acquisition cost, whichever is lower. There is a rebuttable presumption that technology equipment has a three-year life and that the value declines on a straight-line basis.
Therefore, the presumptive value of a component with an original cost of $1,000 would be $666 after one year, $333 after two years, and have no value after three years. Time periods are calculated from the date that equipment was originally delivered to the applicant. The applicant or service provider may provide evidence of fair market value to rebut this presumption. Although the form of the evidence is flexible, the best evidence would be from an independent third party source indicating the secondary market prices for the specific make and model of equipment traded in.
If a PBX is to be used for 25 classrooms and 30 extensions, and one extension is used for an ineligible pre-kindergarten classroom rather than K-12, is the entire PBX eligible for support?
Products or services provided to both eligible and ineligible locations must be cost-allocated as described in Cost Allocation Guidelines for Products and Services. In this case, one classroom is not eligible because it is used for pre-kindergarten rather than K-12, so the cost of the PBX must be cost allocated. For example, the funding request could be reduced by 1/30 to subtract the extension at the ineligible location.
Assume that a service provider is migrating all of its customers from Technology A to Technology B. Both technologies provide a data conduit that is leased on a monthly basis. How should this migration be undertaken to be consistent with program requirements? If an applicant wishes to make a change in the products or services previously approved, this can be accomplished, in some cases, through the service substitution process. The substitution must maintain "same functionality," as appears to be the case in this example. See Service Substitutions.
If an applicant has not yet applied for services and is aware of an upcoming change, another option is to submit a funding request for Technology A for part of the funding year and a separate funding request for Technology B for the other part of the funding year.
If Priority 2 requests for wiring and infrastructure are denied because support is not available at an applicant's discount level, are Priority 1 requests affected?
USAC will approve eligible Priority 1 requests without considering whether there are sufficient funds to approve Priority 2 requests. This can create several scenarios, including: (1) the applicant may be able to pay for the Priority 2 components without USF support; (2) without Priority 2 funding, the applicant may need to modify the Priority 1 components through the service substitution process; or (3) the applicant may be unable to proceed with approved Priority 1 services, in which case it should cancel the funding commitment by filing an Adjustment to Funding Commitment and Modification to Receipt of Service Form (Form 500).
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