The Federal Communications Commission (FCC) recently issued a Report and Order implementing changes to the Schools and Libraries Universal Service Support Mechanism (the E-rate program).1 The FCC's Report and Order adopts a number of proposals put forward in the E-rate Broadband Notice of Proposed Rulemaking, which sought comment on proposals to modify the program to advance the goals of the National Broadband Plan. The FCC's changes are intended to upgrade and modernize the E-rate program to improve the ability of students and the public to utilize broadband services for educational needs. The changes to the E-rate program are intended to: (1) provide more flexibility to select and make available cost-effective broadband and other communications services; (2) simplify and streamline the E-rate administrative requirements; and (3) improve safeguards against waste, fraud, and abuse.

More flexibility for broadband services: One of the most significant rule changes made in the Report and Order is that E-rate participants are now permitted to lease dark or lit fiber from any entity, including for profit and nonprofit entities such as telecommunications carriers, non telecommunications carriers, utility providers, research and education networks, and regional, state, and local governments. Participants that choose to lease dark fiber must light it immediately to receive E-rate support and may not acquire unneeded capacity or warehouse dark fiber to use in the future. Participants should be aware that maintenance and installation charges are eligible for program support, but construction charges incurred for build-out to the applicant's facilities and the costs of the electronics needed to light the fiber are not eligible for program support.2

The Report and Order also permits schools to open their E-rate supported facilities to the general public during non-school hours. Because applicants may not request funding for more services than are necessary to serve their student population, community use of E-rate supported facilities must be incidental and not increase the overall costs of the E-rate program. In addition, participants may not charge for the community's use of services and facilities purchased with E-rate funds, but may assess fees to help defray the cost of computers and training, and the additional electricity, security, and heating costs incurred to permit community access.

The new rules also permit schools that serve unique populations to receive E-rate funding for all supported services provided in the residential areas of those schools. Eligible schools include schools located on tribal lands; designed to serve students with medical needs or physical, cognitive, or behavioral disabilities; or where 35 percent or more of the student population are eligible for the national school lunch program. Juvenile justice facilities are also eligible.

The Report and Order also describes the FCC's 2011 pilot program to support off-campus wireless Internet connectivity for mobile learning devices. The FCC will release a public notice detailing the timeline for schools interested in participating in the pilot program to submit applications. E-rate support will be provided only for the connectivity services, not for the mobile devices or equipment.

Finally, the Report and Order indexes the annual E-rate funding cap to the gross domestic product chain-type price index (GDP-CPI) to ensure the amount of funds available to E-rate participants is annually adjusted for inflation.

Simplified administrative requirements: Under the new rules, E-rate technology plan requirements for all priority one applications are eliminated. The requirements are retained for priority two applications. In addition, applicants are no longer required to have a technology plan in place before a third-party master contract's FCC Form 470 is posted. Applicants are also no longer required to demonstrate that they have a budget sufficient to obtain and support non-discounted elements in their technology plans. Finally, participants may dispose of E-rate equipment for payment or other consideration, but not sooner than five years after the equipment is installed.

Safeguards against waste, fraud, and abuse: The FCC will retain the competitive bidding and waiting period obligations for all service requests, but will simplify the FCC Form 470 process for all E-rate program participants. The new form will be streamlined to request only the information necessary to comply with the Commission's competitive bidding requirements. The FCC anticipates that the new Form 470 will take effect prior to the opening of the filing window for funding year 2011. If an applicant has already submitted a Form 470 for 2011, it will not be required to submit a new form.

If you have any questions concerning the impact of these adopted policy and rule changes and/or would like to track the FCC's release of the new Form 470 or the application process for its pilot mobile support program, please contact one of the Hogan Lovells US LLP lawyers listed.