Expanded Guidelines for On-Premise Priority One Equipment
Because of the limited funding available for Priority Two Internal Connection services in recent years, one of the thorniest issues in application review is the proper categorization of certain on-premise equipment. Although on-premise equipment is generally presumed to be Internal Connections, there is precedent under a 1999 FCC ruling (see the "Tennessee Decision") whereby specific interface equipment located on an applicant's premise can be considered part of a Priority One Telecommunications or Internet Access service. The SLD is concerned that applicants and/or vendors may attempt to use this decision to improperly seek Priority One funding for what should otherwise be categorized as Internal Connection equipment.
Earlier this summer, we reported that SLD reviewers were asking applicants requesting Priority One funding for on-premise equipment to certify that such equipment met all seven conditions set forth under the Tennessee Decision (see E-rate News for the Week of 7/1 - 7/5/2002 in the Archives section of the E-Rate Central Web site).
This week, the SLD posted an extensive set of guidelines on its Web site (see Priority One Guidelines) to further explain the seven Priority One conditions. As described in these guidelines, the seven conditions are:
| (a) |
The on-premise equipment will be provided by the same service provider that provides the eligible telecommunications or Internet access service of which it is a part. |
| (b) |
"Ownership of the equipment will not transfer to the school or library in the future, and the relevant contract or lease does not include an option to purchase the equipment by the school or library." |
| (c) |
"The school or library has no contractual right to exclusive use of the equipment. Upfront, capital charges of the on-premise equipment are less than 67% of total charges (recurring plus non-recurring) in the funding year." |
| (d) |
"Upfront, capital charges of the on-premise equipment are less than 67% of total charges (recurring plus non-recurring) in the funding year. |
| (e) |
"The equipment will not be used by the school or library for any purpose other than receipt of the eligible telecommunications or Internet access service of which it is a part." |
| (f) |
"The Local Area Network for data communications of the school or library is functional without dependence on the equipment." |
| (g) |
"Responsibility for maintaining the equipment rests with the service provider, not the school or library." |
Five additional conditions, described as "logical implications" of the above, are also described and are likely to become a part of future SLD review procedures. They are:
| (h) |
The equipment is limited to "WAN components," specifically excluding equipment that is part of a local area network." |
| (i) |
The equipment must have a "specific demarcation. A single dividing line between the local and wide area networks is an implicit and fundamental part of the FCC decision. For example, internal wiring (or wireless capability) that connects multiple locations within a school or library is inherently a part of the local network." This condition is further clarified in diagrams attached to the SLD guidelines." |
| (j) |
The equipment must be a part of a "continuous" service. |
| (k) |
Use of the equipment must be "economically justifiable. Configurations that attempt to meet the conditions by including redundant components, or components that do not provide reasonable functional utility, are contrary to program requirements to choose the most cost-effective service." |
| (l) |
The equipment must be a part of an eligible Priority One service, and cannot be used for any alternative services. "To be eligible as a telecommunications service, a service must meet the legal definition of telecommunications, and it must be commercially available.Eligible Internet access is limited to "basic conduit access" to the Internet, including e-mail." |
Because of the limited funding available for Priority Two Internal Connection services in recent years, one of the thorniest issues in application review is the proper categorization of certain on-premise equipment. Although on-premise equipment is generally presumed to be Internal Connections, there is precedent under a 1999 FCC ruling (see the "Tennessee Decision") whereby specific interface equipment located on an applicant's premise can be considered part of a Priority One Telecommunications or Internet Access service. The SLD is concerned that applicants and/or vendors may attempt to use this decision to improperly seek Priority One funding for what should otherwise be categorized as Internal Connection equipment.
Earlier this summer, we reported that SLD reviewers were asking applicants requesting Priority One funding for on-premise equipment to certify that such equipment met all seven conditions set forth under the Tennessee Decision (see E-rate News for the Week of 7/1 - 7/5/2002 in the Archives section of the E-Rate Central Web site).
This week, the SLD posted an extensive set of guidelines on its Web site (see Priority One Guidelines) to further explain the seven Priority One conditions. As described in these guidelines, the seven conditions are:
| (a) |
The on-premise equipment will be provided by the same service provider that provides the eligible telecommunications or Internet access service of which it is a part. |
| (b) |
"Ownership of the equipment will not transfer to the school or library in the future, and the relevant contract or lease does not include an option to purchase the equipment by the school or library." |
| (c) |
"The school or library has no contractual right to exclusive use of the equipment. Upfront, capital charges of the on-premise equipment are less than 67% of total charges (recurring plus non-recurring) in the funding year." |
| (d) |
"Upfront, capital charges of the on-premise equipment are less than 67% of total charges (recurring plus non-recurring) in the funding year. |
| (e) |
"The equipment will not be used by the school or library for any purpose other than receipt of the eligible telecommunications or Internet access service of which it is a part." |
| (f) |
"The Local Area Network for data communications of the school or library is functional without dependence on the equipment." |
| (g) |
"Responsibility for maintaining the equipment rests with the service provider, not the school or library." |
Five additional conditions, described as "logical implications" of the above, are also described and are likely to become a part of future SLD review procedures. They are:
| (h) |
The equipment is limited to "WAN components," specifically excluding equipment that is part of a local area network." |
| (i) |
The equipment must have a "specific demarcation. A single dividing line between the local and wide area networks is an implicit and fundamental part of the FCC decision. For example, internal wiring (or wireless capability) that connects multiple locations within a school or library is inherently a part of the local network." This condition is further clarified in diagrams attached to the SLD guidelines." |
| (j) |
The equipment must be a part of a "continuous" service. |
| (k) |
Use of the equipment must be "economically justifiable. Configurations that attempt to meet the conditions by including redundant components, or components that do not provide reasonable functional utility, are contrary to program requirements to choose the most cost-effective service." |
| (l) |
The equipment must be a part of an eligible Priority One service, and cannot be used for any alternative services. "To be eligible as a telecommunications service, a service must meet the legal definition of telecommunications, and it must be commercially available.Eligible Internet access is limited to "basic conduit access" to the Internet, including e-mail." |
The SLD has added a new topical index to the Reference Area of their Web site (see Reference Area). The new index can be accessed by clicking on the shaded words located on the right just under the alphabet bar on the basic reference page, reading "Click Here for SLD Information by Topic."
The new topical index is organized with folders, each containing sub-index links to the reference material. In particular, please note the recently updated references under "Deadlines" for service delivery, Form 486s, and invoices (including BEAR forms).
The SLD has added a new topical index to the Reference Area of their Web site (see Reference Area). The new index can be accessed by clicking on the shaded words located on the right just under the alphabet bar on the basic reference page.
The new topical index is organized with folders, each containing sub-index links to the reference material. In particular, please note the recently updated references under "Deadlines" for service delivery, Form 486s, and invoices (including BEAR forms).