Legal Alerts and Articles
FCC Extends E-rate Funding to Interconnected VoIP and Text Messaging Services
In a Report and Order ("Order") released on December 2, 2009, the FCC released the Eligible Services List ("ESL") for the 2010 E-rate funding year, which begins on July 1, 2010 and concludes on June 30, 2011. The Order, among other things, extends E-rate funding eligibility to interconnected Voice over Internet Protocol ("VoIP") and text messaging services.
Since its implementation in 1998, the FCC's E-rate program provides discounts on eligible telecommunications and information services to schools and libraries under the Schools and Libraries Universal Service Support Mechanism. The Universal Service Administrative Company ("USAC") reimburses service providers on discounts that are passed onto participating schools and libraries. The ESL classifies telecommunications and information services into five general categories of services eligible for E-rate support: telecommunications service, internet access, internal connections, basic maintenance of internal connections, and miscellaneous. The telecommunications service and internet access categories receive Priority 1 funding while the other categories receive Priority 2 funding. Priority 1 services are allocated greater resources than Priority 2 services.
Interconnected VoIP and Text Messaging Services
Pursuant to the Order, interconnected VoIP and text messaging services are now eligible for funding under the E-rate program. The Order allows interconnected VoIP services to be classified under both the telecommunications service and internet access categories of the ESL, thereby allowing the schools and libraries to receive discounted interconnected VoIP services from either a telecommunications service provider or from an internet access provider. Interconnected VoIP service is eligible for Priority 1 funding, as it provides real time, two-way communications similar to other Priority 1 services. However, not all components of an interconnected VoIP system are eligible for Priority 1 funding. Internal VoIP connections are only eligible for Priority 2 funding and end-user equipment components of interconnected VoIP systems are not eligible for any E-rate funding.
E-rate support now also extends to text messaging services, but only when such services are used for educational purposes, which the FCC defines as "activities that are integral, immediate, and proximate to the education of students or library patrons." Special features, software, and/or applications that facilitate the mass distribution of text messages or creation of distribution groups are ineligible for E-rate funding. The Order classifies text messaging under the telecommunications service category of the ESL because it is usually offered in conjunction with wireless telephone service.
It is important to note that the FCC has not yet designated the regulatory classification for either interconnected VoIP or text messaging services. The Order clarifies that ESL categorization of text messaging and interconnected VoIP has no relation to the ultimate regulatory classification of these services.
Clarification of Services Eligibility
The Order also clarifies the eligibility of other services included in the ESL. For video on-demand services, the Order delineates the portion of the service eligible for funding as internal connections, which transports video to the classroom or parts of the library, and the portions ineligible for funding, which are the parts of the service that store video content. Whereas Ethernet previously was categorized under internal connections, the FCC now categorizes it under the telecommunications service category because the service has expanded from internal networks to networks that span great distances.
Additional clarification is also provided for the categorization and portions of other services previously eligible for funds, including web hosting, wireless LAN controllers, interconnected VoIP-related software, and virtualization software. The Order also lists services specifically excluded from the new ESL, including telephone broadcast messaging services and softphones.
To view the Order please see http://bit.ly/4BjTKk. The complete ESL is available at http://bit.ly/6BOn6A.
Competitive Bidding Process
In order to obtain E-rate support for the provision of eligible services to schools and libraries, service providers must participate in the E-rate competitive bidding process. To do so, service providers must first obtain a Service Provider Identification Number ("SPIN") by filing a completed Form 498 with USAC. Providers can then search for service requests from schools and libraries by reviewing information posted on USAC's website.
Registered service providers may submit bids for specific requests, and if selected to provide the proposed services, work with the school or library to complete the rest of the funding application process. USAC began accepting service requests on December 3, 2009 and the requests are concurrently posted onto USAC's website as they are received and processed. A school or library must wait at least 28 days from the time its request is posted on USAC's website before selecting a service provider. To obtain support in the 2010 E-rate funding year, a service provider must be selected by the school or library and USAC notified of the selection by February 11, 2010.
For more information on the competitive bidding process, please see http://www.universalservice.org/sl/.
Request for Comment
In the Order, the FCC also seeks comment on the inclusion of additional services in the E-rate program for 2011 and subsequent years, including firewall, scheduling services, and wireless internet access applications. Comments will be due 30 days after the Order is published in the Federal Register.
If you have any questions or would like assistance with participating in the E-rate process, please do not hesitate to contact us.
December 2009