The FCC has reversed a determination by the Universal Service Administration Company (USAC) denying E-rate funding for leased transmission telecommunications services and associated fiber installation. It concluded that the USAC denial had been based upon a misunderstanding of the school system’s request.   The Billings (Montana) School District 2 had sought E-rate support in FY 2006 for digital transmission services from Bresnan Communications. The request covered a lease of fiber optic wide area network (WAN) services plus a non-recurring charge to cover installation of fiber between school buildings. USAC denied funding in the belief that Bresnan would not be providing telecommunications services in connection with the WAN.  

The misunderstanding apparently arose when, in response to a program integrity assurance review, Billings identified its existing telephone and Internet service providers without making any reference to Bresnan, which USAC took to mean that Bresnan would not be providing services in connection with the new WAN. USAC was concerned that the contract with Bresnan was tantamount to a purchase agreement in which service would be provided by a party independent from the installer, which is not eligible for funding, rather than a genuine lease.

Upon appeal, Billings clarified that Bresnan indeed would be providing service over the WAN, and so the funding request did involve eligible services. In agreeing, the FCC noted that USAC still might have to reduce the request by the amount of ineligible charges for service to ineligible locations. These might include installation of fiber between school buildings on the same property, defined as a path that does not cross a public right of way.  

Reading between the lines of the brief FCC decision, it appears that the real problem was that while Billings correctly answered the question USAC had posed, the question itself was misleading. That is, USAC’s interest in assuring eligibility was whether Bresnan would be providing services with the new WAN, but instead they asked who was providing service, which really wasn’t relevant. The lesson to be learned from this instance (and others) is that applicants facing USAC review must be sure that the information they are providing is relevant to establishing the eligibility of their proposed project, as the question posed may not necessarily suggest the proper response. It is also important to read each question very carefully, as on occasion it might appear to be a standard one, but with changes that alter the meaning and require a different response.

The FCC also waived on its own motion any procedural deadlines, such as the invoicing deadline, that might have already passed during the pendency of the appeal. The Commission reasoned that filing an appeal of a denial of funding is likely to cause a petitioner to not observe the remaining deadlines for the funding year in question.