P. O. BOX 2120

September 19, 1997


TO: Division Superintendents
FROM: Richard T. La Pointe
Superintendent of Public Instruction
SUBJECT: Universal Service Discount Update

  On June 13, 1997, in Supts. Memo number 103, the Universal
  Service Discount program (E-rate) was introduced and
  information was provided for superintendents. Since that
  memo was issued, there have been many changes in the
  regulations and administrative process.

  On May 7, 1997, the Federal Communications Commission issued
  a Report and Order on Universal Service Discounts for
  schools, libraries and rural health care providers. The
  Report and Order began the process of instituting new
  federal regulations aimed at discounting telecommunications
  rates to schools and libraries by 20 to 90 percent. The
  regulations have been revised twice since May 7 and became
  law on July 17, 1997.

  According to the new regulations, schools and libraries will
  be eligible for discounts of 20 to 90 percent of the lowest
  competitively available rate for all commercially available
  telecommunications services, Internet access, and
  installation and maintenance of internal connections
  providing telecommunications services from the internet to
  classrooms. Discounts will apply to telephone service (local
  and long distance); advanced telecommunications services
  such as video-on-demand and distance learning; and a "basic
  conduit" from an internet service provider (ISP) to the
  classroom. Discounts can be applied to ISP charges and
  inside wiring including routers, hubs, servers, wires and
  installation and maintenance of those items. Computers,
  software (other than software needed to manage the network)
  and staff training are not eligible for discounts.
  Additionally, schools and libraries will have the
  flexibility to purchase whatever package of
  telecommunications services they believe will meet their
  needs most effectively and efficiently.

  Discount percentage rates will be based on the number of
  students eligible for the national school lunch program and
  the location (rural or urban) of the school or library. The
  FCC has provided a matrix of six levels of discounts.
  Discounts can apply either to individual schools, or can be
  averaged for the school division. Schools and libraries may
  combine efforts in consortia in order to utilize services
  more efficiently. The FCC encourages school divisions to
  consolidate  service requests at division levels or within

  On July 18, 1997, the FCC issued an order that three
  corporations be formed to administer the Universal Service
  Discount program. Those corporations are: The Universal
  Service Administrative 

  Corp. (USAC), charged with collecting and dispersing money;
  the Schools and Libraries Corp. (SLC), charged with
  reviewing and approving discount applications from schools
  and libraries; and the Rural Health Care Corp. (RHCC),
  charged with reviewing and approving discount applications
  from rural health care providers. On September 9, 1997, the
  chairman of the FCC named the board of directors of the
  three corporations. The boards are required to hold their
  initial meeting prior to September 23. 

  In an order issued on August 15, the FCC ordered the
  National Exchange Carrier Association (NECA) to begin the
  Universal Service administrative process until the
  corporations are staffed sufficiently to administer the
  programs. NECA estimates they will be ready to accept
  applications by mid-November. The FCC, working with the US
  Department of Education, plans to issue official
  applications shortly. When applications are available, the
  Virginia Department of Education will mail them to school
  divisions, the application will also be published on the DOE

  To qualify for discounts, schools and libraries must provide
  certain information on their applications. Although
  applications are not yet available, the FCC regulations
  include the following requirements that schools and
  libraries must meet in order to participate:

  Schools and libraries must prepare a technology plan for using
  the discounted telecommunications services. The plan must be approved
  by the Virginia Department of Education.

  In addition to the approved technology plan, schools and 
  libraries must provide the following information to the
  administrator (NECA) as specified in the Code of Federal 
  Regulations Part 54.504 of Title 47:

          (a)  Competitive Bidding Requirement. All eligible
                 schools, libraries, and consortia including those
                 entities shall participate in a competitive
                 bidding process, pursuant to the requirements
                 established in this subpart, but this requirement
                 shall not preempt state or local competitive
                 bidding requirements. 

          (b)  Posting of Requests for Service. 

          (1)  Schools, libraries, and consortia including
                 those entities wishing to receive discounts
                 for eligible services under this subpart
                 shall submit requests for services to a
                 subcontractor designated by the administrator
                 for this purpose. Requests for services shall
                 include, at a minimum, the following
                 information, to the extent applicable to the
                 services requested: 

               (i)  The computer equipment currently
                      available or budgeted for purchase for
                      the current, next, or other future
                      academic years, as well as whether the
                      computers have modems and, if so, what
                      speed modems; 

               (ii) The internal connections, if any, that
                      the school or library has in place or
                      has budgeted to install in the current,
                      next, or future academic years, or any
                      specific plans for an organized
                      voluntary effort to connect the

              (iii) The computer software necessary to
                      communicate with other computers over an
                      internal network and over the public
                      telecommunications network currently
                      available or budgeted for purchase for
                      the current, next, or future academic

               (iv) The experience of, and training received
                      by, the relevant staff in the use of the 
                      equipment to be connected to the
                      telecommunications network and training
                      programs for which funds are committed
                      for the current, next, or future
                      academic years; 

               (v)  Existing or budgeted maintenance
                      contracts to maintain computers; and 

               (vi) The capacity of the school's or
                      library's electrical system in terms of
                      how many computers can be operated
                      simultaneously without creating a fire

          (2)  The request for services shall be signed by
                 the person authorized to order
                 telecommunications and other supported
                 services for the school or library and shall
                 include that person's certification under
                 oath that: 

               (i)  The school or library is an eligible
                      entity under Sects. 254(h)(4) and 254(h)(5)
                      of the Act and the rules adopted under
                      this subpart; 

               (ii) The services requested will be used
                      solely for educational purposes; 

              (iii) The services will not be sold, resold,
                      or transferred in consideration for
                      money or any other thing of value; 

               (iv) If the services are being purchased as
                      part of an aggregated purchase with
                      other entities, the request identifies
                      all co-purchasers and the services or
                      portion of the services being purchased
                      by the school or library; 

               (v)  All of the necessary funding in the
                      current funding year has been budgeted
                      and approved to pay for the
                      "non-discount" portion of requested
                      connections and services as well as any
                      necessary hardware, software, and to
                      undertake the necessary staff training 
                      required to use the services

               (vi) The school, library, or consortium
                      including those entities has complied
                      with all applicable state and local
                      procurement processes; and 

              (vii) The school, library, or consortium
                      including those entities has a
                      technology plan that has been certified
                      by its state or an independent entity
                      approved by the Commission. 

          (3)  After posting a description of services from
                 a school, library, or consortium of these
                 entities on the school and library website,
                 the administrator's subcontractor shall send
                 confirmation of the posting to the entity
                 requesting services. That entity shall then
                 wait at least four weeks from the date on
                 which its description of services is posted
                 on the website before making commitments with
                 the selected providers of services. The
                 confirmation from the administrator shall
                 include the date after which the requestor
                 may sign a contract with its chosen

  These regulations may be subject to change when the
  applications are issued; however,schools interested in
  receiving support may wish to compile the information the
  FCC is requesting.

  Since the Universal Service regulations were issued the FCC
  has made two reconsiderations affecting the implementation
  of the regulations. First the FCC specified that the
  effective date discounts will apply as January 1, 1998.
  Discounts will apply to approved schools and libraries for
  services received after January 1, 1998.

     The second reconsideration addresses existing contracts.
  According to the regulations:

          54.500 Terms and Definitions.

               (b)  Existing contract.  For the purpose of
                      section 54.511(c), an "existing contract" is
                      any signed contract for services eligible for 
                      discounts pursuant to this subpart between an
                      eligible school or library as defined under  
                      54.501 and a service provider that either:

                    (1)     was signed prior to November 8,
                              1996, or

                    (2)     is limited to services provided
                              before December 31, 1998, and was
                              signed on or after November 8,
                              1996, but before the first date
                              that the universal service
                              competitive bidding system
                              described in   54.504 is
                              operational.  The competitive
                              bidding system will be deemed to be
                              operational when both the universal
                              service administrator is ready to
                              accept and post requests for
                              service from schools and libraries
                              on a website and that website may
                              be used by potential service

  This reconsideration means that any contract entered into
  before November 8, 1996, will be considered exempt from the
  competitive bidding and web posting provision for the life
  of the contract. Any contract entered into after November 8
  but before the administrator is ready to receive
  applications will be considered existing for 1998 only.
  Contracts signed during the latter period will be subject to
  competitive bids for the 1999 application process.

  For questions or current Department activities related to
  Universal Service Discounts, contact Greg Weisiger, VSEN
  Administrator, at (804) 692-0335. Additionally, information
  is continuously updated on the DOE Homepage.