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Independent School District of Boise City

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Released: October 2, 2012

Federal Communications Commission

DA 12-1574

Before the

Federal Communications Commission

Washington, DC 20554

In the Matter of
)
)
Requests for Review of
)
Decision of the
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Universal Service Administrator by
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Independent School District of Boise City )
File No. SLD-314699
Boise, Idaho
)
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Schools and Libraries Universal Service
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CC Docket No. 02-6
Support Mechanism
)

ORDER

Adopted: October 2, 2012

Released: October 2, 2012

By the Chief, Telecommunications Access Policy Division, Wireline Competition Bureau:
1. Consistent with precedent,1 we grant and remand requests filed by the Independent School
District of Boise City (Boise ISD) and its service provider, IDACOMM, seeking review of a decision
made by the Universal Service Administrative Company (USAC) under the E-rate program (more
formally known as the schools and libraries universal service support program) denying Boise ISD
funding on the basis that Boise ISD was purchasing exclusive access to a wide area network (WAN) in
violation of E-rate rules.2 Based on our review of the record, we find that Boise ISD’s leasing of dark


1 Federal-State Joint Board on Universal Service, Access Charge Reform, Price Cap Performance Review for Local
Exchange Carriers, Transport Rate Structure and Pricing, End User Common Line Charge
, CC Docket Nos. 96-45,
96-262, 94-1, 91-213, and 95-72, Fourth Order on Reconsideration in CC Docket No. 96-45, Report and Order in
CC Docket Nos. 96-45, 96-262, 94-1, 91-213, 95-72, 13 FCC Rcd 5318, 5431 (1997) (Fourth Order on
Reconsideration
) (finding that although schools and libraries are not permitted to build or a purchase WAN using E-
rate support, they are permitted to lease WAN telecommunications services); Requests for Review of the Decisions
of the Universal Service Administrator by the Department of Education of the State of Tennessee et al.,
CC Docket
Nos. 96-45 and 97-21, Order, 14 FCC Rcd 13734, 13750 (Tennessee Order) (1999) (concluding that relevant indicia
for determining whether an applicant is seeking to purchase a WAN include: what services are provided over the
WAN, whether there are exclusivity or lease purchase arrangements, and the structure of the contract (e.g. whether
there is a substantial payment for upfront capital costs); Request for Review by Brooklyn Public Library of a
Decision of the Universal Service Administrator
, CC Docket Nos. 96-45 and 97-21, Order, 15 FCC Rcd 18598,
18606-07 (Brooklyn Order) (2000) (finding that because the non-recurring charge for capital investment vastly
exceeded
the monthly recurring charge, Brooklyn must prorate the non-recurring capital investment charges equally
over a term of at least three years in duration).
2 Letter from Jim Marconi, The Independent School District of Boise City, to Office of the Secretary, Federal
Communications Commission (filed May 19, 2003) (Boise ISD Request for Review); Letter from Michael K. Feiler,
Executive Vice President, IDACOMM, to Office of the Secretary, Federal Communications Commission (filed May
28, 2003) (IDACOMM Request for Review). See also Letter from Jim Marconi, The Independent School District of
Boise City, to Office of the Secretary, Federal Communications Commission (dated Nov. 21, 2003) (Appeal
(continued….)

Federal Communications Commission

DA 12-1574

fiber did not constitute purchase of a WAN, and that its lease of dark fiber service in funding year 2002
was eligible for E-rate funding, subject to certain other program requirements.
2. Schools and libraries may use universal service funds to lease telecommunications services
provided by WANs and to fund equipment and infrastructure build-out associated with the provision of
such services.3 By contrast, schools and libraries are not permitted to build or purchase WANs using E-
rate support.4 The Commission has found that some leasing arrangements for WAN services are in effect
purchase agreements that grant the lessee de facto ownership status.5 The Commission has concluded that
relevant indicia for determining whether an applicant is seeking to purchase a WAN include: what
services are provided over the WAN, whether there are exclusivity or lease purchase arrangements, and
the structure of the contract (e.g. whether there is a substantial payment for upfront capital costs).6 For
instance, if the applicant seeks universal service funding to purchase dedicated facilities for its exclusive
use, it is likely that its funding request would be denied on the basis that the applicant is constructing an
ineligible WAN.7 None of these factors alone is determinative, but each must be considered in light of
the facts presented.8
3. Boise ISD sought E-rate program support to lease dark fiber from IDACOMM as Internet
access in funding year 2002.9 It sought $555,000 in annual recurring charges and $365,000 in non-
recurring charges to install the dark fiber to Boise ISD’s schools throughout the city.10 USAC denied
funding because it determined that Boise ISD’s request for E-rate funding in the Internet access category
for “an exclusive access WAN reaches the same result as that prohibited by section 54.518 of [the
(Continued from previous page)


Addendum). Section 54.719(c) of our rules provides that any person aggrieved by an action taken by a division of
USAC may seek review from the Commission. 47 C.F.R. § 54.719(c).
3 Fourth Order on Reconsideration, 13 FCC Rcd at 5431, para. 193 n.585; Tennessee Order, 14 FCC Rcd at 13749,
para. 29 (recognizing that all service providers include within their customer rates some amount of the cost of
building the facilities used to provide such services to customers and that universal service funds may be used to
fund equipment and infrastructure build-out associated with the provision of eligible services to eligible schools and
libraries); Brooklyn Order, 15 FCC Rcd at 18604, para. 12 (reaffirming the principle that universal service funds
may be used to fund equipment and infrastructure build-out associated with the provision of eligible services to
schools and libraries).
4 47 C.F.R. § 54.518. See Fourth Reconsideration Order, 13 FCC Rcd at 5430-31.
5 Tennessee Order, 14 FCC Rcd at 13750, para. 31.
6 Id.
7 See Brooklyn Order, 15 FCC Rcd at 18604, para. 14, n.35.
8 Tennessee Order, 14 FCC Rcd at 13750, para. 31.
9 Boise ISD Request for Review at 1.
10 See IDACOMM Request for Review; Letter from Schools and Libraries Division, USAC to Jim Marconi, The
Independent School District of Boise City, dated Dec. 3, 2002 (Funding Commitment Decision Letter). See also
Facsimile from Jim Marconi, The Independent School District of Boise City, to Ali Raza, Schools and Libraries
Division, USAC, Attachment-Dark Fiber Strands Master License Agreement (dated Apr. 25, 2002)(IDACOMM
Contract); The Independent School District of Boise City, FCC Form 471, dated Jan 16, 2002; Item 21 Attachment 6
– IDACOMM invoice.
2

Federal Communications Commission

DA 12-1574

Commission’s] rules.”11 Both Boise ISD and IDACOMM filed appeals with USAC seeking review of the
decision to deny funding, asserting that Boise ISD does not have exclusive access to the fiber because
IDACOMM retains the right to provision new circuits for additional clients on the fiber currently utilized
by Boise ISD.12 USAC denied the appeal.13 Boise ISD and IDACOMM then filed the instant petitions
for review with the Commission.14
4. Based on our review of the record, we find that the service requested by Boise ISD, leased
dark fiber, is eligible for E-rate funding.15 As was the case with the applications at issue in the Tennessee
Order
, Boise ISD and IDACOMM did not have an exclusivity arrangement limiting the use of the
IDACOMM network to Boise ISD.16 Under the terms of the contract, IDACOMM retained ownership of
all of the fiber within its network including the fiber supplying connectivity to Boise ISD, as well as the
right to provision new circuits for additional clients on the same fiber.17 The Commission has previously
held that recipients may receive E-rate discounts for the lease of equipment and infrastructure build-out
associated with the provision of services.18 Because the non-recurring charges for this lease of dark fiber
did not vastly exceed the recurring charges sought, Boise ISD did not need to amortize according to the
precedent established in the Brooklyn Order.19


11 Funding Commitment Decision Letter; see also Letter from Schools and Libraries Division, USAC to Jim
Marconi, The Independent School District of Boise City, dated Apr. 1, 2003 (Administrator’s Decision on Appeal).
See also 47 C.F.R. § 54.518.
12 Letter from Jim Marconi, The Independent School District of Boise City, to Schools and Libraries Division,
USAC (dated Dec. 9, 2002) (Boise ISD USAC Appeal); Letter from Michael K. Feiler, Executive Vice President,
IDACOMM, to Schools and Libraries Division, USAC (filed Jan. 23, 2003) (IDACOMM USAC Appeal).
13 Administrator’s Decision on Appeal.
14 Boise ISD Request for Review; IDACOMM Request for Review.
15 Dark fiber was eligible as Internet access in funding year 2002, and it appears that Boise ISD met the eligibility
criteria. The dark fiber was going to be used immediately, Boise ISD was going to provide the modulating
electronics to light the fiber, the electronics were located solely at eligible sites, and they claimed it was the most
cost effective solution for Internet access. See USAC website, Schools and Libraries Eligible Services List, 2001
Eligible Services List – October; http://www.usac.org/sl/applicants/beforeyoubegin/eligible-services-list.aspx dated
Oct. 17, 2001 at 33 (Funding Year 2002 ESL).
16 Tennessee Order, 14 FCC Rcd at 13750-13751, paras. 31-32.
17 IDACOMM Request for Review at 2; Boise ISD USAC Appeal at Attachment (Master License Agreement).
18 Tennessee Order, 14 FCC Rcd at 13749, para. 29 (stating that the Commission expects Internet access service
providers to include some portion of the cost of facilities to provide Internet access within the charges for providing
that access and that it could not find that such costs should be excluded from those charges). The Commission
established in the Fourth Order on Reconsideration that, while WANs could not be built or purchased using E-rate
support, such services could be leased. See Fourth Order on Reconsideration, 13 FCC Rcd at 5318, 5431, para. 193
n.585.
19 Brooklyn Order, 15 FCC Rcd at 18606-18607, para. 20 (finding that because the non-recurring charge for capital
investment vastly exceeded the monthly recurring charge, Brooklyn could receive funding for the non-recurring
charges associated with capital investment in an amount equal to the investment prorated equally over a term of at
least three years in duration). The non-recurring upfront charge sought by Boise ISD was also below the $500,000
threshold used by USAC as a processing standard for amortization of upfront capital charges. See USAC website,
Wide Area Networks, Capital Investment Costs, http://www.usac.org/sl/applicants/beforeyoubegin/eligible-
(continued….)
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Federal Communications Commission

DA 12-1574

5. Therefore, based on our review of the record, we find that Boise ISD’s request for Internet
access is eligible and grant the Requests for Review. On remand, we direct USAC to process and grant
E-rate support for Boise ISD’s funding year 2002 request for leased dark fiber and to reduce the funding
request by the amount of any ineligible charges. While the dark fiber Boise ISD sought was eligible for
funding, the IDACOMM contract does include two locations described as “Facilities/Operations.”20
These would not qualify as eligible applicant sites, and we direct USAC to reduce funding by the costs
attributed to servicing these sites. We also direct USAC to reduce the funding request by any other
ineligible costs that were included.
6. We also waive any Commission rules and direct USAC to waive any procedural deadlines,
such as the invoicing deadline, that might be necessary to effectuate our ruling, given the length of time
that has passed since the application was denied. To ensure that the underlying application is resolved
expeditiously, we direct USAC to complete its review and issue an award or a denial based on a complete
review and analysis no later than 90 calendar days. In remanding this application to USAC, we make no
finding as to the ultimate eligibility of the services or the petitioner’s application. At this time, there is no
evidence of waste, fraud or abuse in the record.
7. Accordingly, IT IS ORDERED that, pursuant to the authority contained in sections 1-4 and
254 of the Communications Act of 1934, as amended, 47 U.S.C. §§ 151-154 and 254, and pursuant to
authority delegated in sections 0.91, 0.291, and 54.722(a) of the Commission’s rules, 47 C.F.R. §§ 0.91,
0.291, and 54.722(a), that the requests for review filed by the Independent School District of Boise City
and IDACOMM ARE GRANTED and the underlying application IS REMANDED to USAC for further
action consistent with this order no later than 90 calendar days from the release date of this order.
FEDERAL COMMUNICATIONS COMMISSION
Trent B. Harkrader
Chief
Telecommunications Access Policy Division
Wireline Competition Bureau
(Continued from previous page)


services/wan.aspx (last visited Oct. 2, 2012) (providing that where applicants enter a multi-year contract and the
upfront or non-recurring charge is $500,000 or more, the total charge must be prorated evenly over a period of at
least three years, and applicants may not seek to recover more than one-third of the total non-recurring charges in
any one funding year if they are $500,000 or more).
20 IDACOMM Contract.
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