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International Business Machines, Inc. and Ysleta Independent School

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Released: November 14, 2012

Federal Communications Commission

DA 12-1797

Before the

Federal Communications Commission

Washington, DC 20554

In the Matter of
)
)
Request for Review of a Decision of the
)
Universal Service Administrator by
)
)
International Business Machines, Inc.
)
)
and
)
)
Ysleta Independent School District
)
File No.: SLD-179273
El Paso, Texas
)
)
Schools and Libraries Universal Service
)
CC Docket No. 02-6
Support Mechanism
)

ORDER

Adopted: November 14, 2012

Released: November 14, 2012

By the Chief, Telecommunications Access Policy Division, Wireline Competition Bureau:
1.
Consistent with E-rate program rules and procedures in effect at the relevant
time,1 we grant requests for review filed by International Business Machines, Inc. (IBM) and
Ysleta Independent School District (Ysleta) of a commitment adjustment (COMAD) decision
issued by the Universal Service Administrative Company (USAC) seeking to recover funds
disbursed to IBM for funding year 2000 under the E-rate program (more formally known as the
schools and libraries universal service program).2
2.
Background. In January 2000, Ysleta applied for E-rate funding pursuant to a
1998 technology plan and contracted with IBM to provide internal connections, including routers,
to its schools.3 USAC subsequently issued a funding commitment decision letter (FCDL)
committing $1,335,659.12 in E-rate support to Ysleta for internal connections, and Ysleta


1 Schools and Libraries Universal Service Support Mechanism, CC Docket No. 02-6, Third Report and
Order and Second Further Notice of Proposed Rulemaking, 18 FCC Rcd 26912, 26919, para. 17 (2003)
(Schools and Libraries Third Report and Order) (stating that the rules, at that time, permitted applicants to
upgrade their equipment on a yearly basis, even when existing equipment continues to have a useful life).
2 See Letter from David B. Brown, on behalf of IBM Americas – Southern and Southwestern Region, to
Office of the Secretary, Federal Communications Commission, CC Docket No. 02-6 (filed Jan. 18, 2005)
(IBM Request for Review); Letter from Clyde A. Pine, Jr., on behalf of Ysleta Independent School District,
to Office of the Secretary, Federal Communications Commission, CC Docket No. 02-6 (filed Dec. 7, 2005)
(Ysleta Request for Review). Section 54.719(c) of the Commission’s 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 See FCC Form 471, Ysleta Independent School District (filed Jan. 22, 2000); Ysleta Request for Review
at 8.


Federal Communications Commission

DA 12-1797

installed the equipment for which it requested support, including the routers.4 In 2001, Ysleta
developed another technology plan after its network requirements surpassed the configuration
supported by its 1998 technology plan.5 Consistent with that technology plan, in 2002, Ysleta
implemented a high-speed wide area network that required it to uninstall these E-rate funded
routers. After nineteen months of use, Ysleta placed the routers in storage intending to use them
for a planned Voice over Internet Protocol (VoIP) project.6
3.
USAC subsequently conducted an audit of Ysleta and found 37 routers purchased
by Ysleta with E-rate funds in storage and not being used by the Ysleta schools.7 In light of its
audit findings, USAC issued a COMAD decision to IBM seeking reimbursement of $208,990.80
from IBM, representing the discounted cost of the 37 routers that had been uninstalled.8 Ysleta
and IBM appealed USAC’s decision to USAC.9 USAC denied Ysleta’s appeal, stating that
“applicants are accountable for carefully developing their technology plan, and utilizing the
equipment requested and obtained with E-rate support properly and efficiently.”10 USAC also
denied IBM’s appeal stating that there was wasteful use of the equipment since Ysleta did not
convey whether the routers were ever connected or in use.11
4.
Ysleta and IBM then filed the instant appeals with the Commission.12 Both
Ysleta and IBM argue that the E-rate program does not have a specific requirement regarding the
minimum use for equipment, and therefore, they should not be required to reimburse USAC for
telecommunications equipment that was once installed and in use.13 Ysleta also contends that


4 See Letter from USAC, Schools and Libraries Division, to Bill Richardson, Ysleta Independent School
District (dated May 5, 2000) (FCDL).
5 See Ysleta Request for Review at 8; FCDL at 3; Information Technology Plan 2001-2004, Ysleta
Independent School District (2001 Technology Plan).
6 See Ysleta Request for Review at 11-12. Ysleta did not implement the VoIP project. Id. at 7, 12-14.
7 See Letter from KPMG, LLP, to USAC, Schools and Libraries Division (dated Jun. 24, 2003) (Ysleta
Audit Report).
8 See Letter from USAC, Schools and Libraries Division, to John Policastro, International Business
Machines Corporation, at 1-2 (dated May 13, 2004) (COMAD Letter).
9 See Letter from Clyde A. Pine, Jr., on behalf of Ysleta Independent School District, to USAC, Schools
and Libraries Division (dated Jul. 6, 2004) (Ysleta July 2004 USAC Appeal); Letter from David B. Brown,
IBM Americas-Southern and Southwestern Regions, to USAC, Schools and Libraries Division (dated Jul.
12, 2004) (IBM USAC Appeal); Letter from Clyde A. Pine, Jr., on behalf of Ysleta Independent School
District, to USAC, Schools and Libraries Division (dated May 12, 2005) (Ysleta May 2005 USAC Appeal);
Ysleta Request for Review at 11-12.
10 See Letter from USAC, Schools and Libraries Division, to Clyde A. Pine, Jr., on behalf of Ysleta
Independent School District (dated Oct. 18, 2005) (Ysleta Administrator’s Decision on Appeal).
11 See Letter from USAC, Schools and Libraries Division, to David B. Brown, IBM Americas-Southern and
Southwestern Regions (dated Nov. 16, 2004) (IBM Administrator’s Decision on Appeal).
12 See Ysleta Request for Review; IBM Request for Review.
13 See Ysleta Request for Review at 20-22; IBM Request for Review at 5-6.
2

Federal Communications Commission

DA 12-1797

USAC’s determination is based on an erroneous conclusion that Ysleta failed to carefully develop
a technology plan that efficiently utilized the requested equipment.14
5.
Discussion. Based upon our review of the record, we grant Ysleta’s and IBM’s
requests, and we find that Ysleta did not violate the E-rate program rules in effect for funding
year 2000. Specifically, in funding year 2000, the rules did not prohibit E-rate applicants from
upgrading their equipment on a yearly basis, even when the existing equipment continued to have
a useful life.15 In this instance, Ysleta installed and used the routers for 19 months for educational
purposes pursuant to its 1998 technology plan.16 By 2001, Ysleta’s network requirements had
surpassed the configuration supported by its 1998 technology plan; therefore, Ysleta developed
another technology plan and uninstalled certain equipment, including the 37 routers, that were
insufficient to meet the needs of the wide area network that Ysleta installed pursuant to its new
technology plan.17 We conclude that Ysleta’s decision to uninstall the E-rate funded routers was
not unreasonable, and that Ysleta complied with the Commission’s rules in effect at that time by
using the routers for 19 months for educational purposes before uninstalling and placing them in
storage in accordance with a Commission-required updated technology plan. We therefore find
that, in this instance, IBM is not required to reimburse USAC the $208,990.80.18 We thus grant
Ysleta’s and IBM’s requests for review and direct USAC to discontinue its recovery action
against IBM.


14 See Ysleta Request for Review at 29-36.
15 See supra n.1. Subsequently, in 2003, the Commission adopted rules to limit the ability of schools and
libraries to engage in wasteful or fraudulent practices when obtaining internal connections. See Schools
and Libraries Third Report and Order
, 18 FCC Rcd at 26923, para. 26 (determining that recipients of
support are expected to use all equipment purchased with universal service discounts at the particular
location, for the specified purpose, for a reasonable period of time). Thus, in this instance, we apply the
rules in effect prior to the Schools and Libraries Third Report and Order because Ysleta submitted its
application prior to 2003.
16 See Ysleta Audit Report at 1; Ysleta Request for Review at 7.
17 See Ysleta Request for Review at 8. According to Ysleta, the routers in question were aging, expensive
to maintain, and only supported one ethernet interface per router, which was insufficient for use in the wide
area network. Id. at 8-11. According to Ysleta, it intended to use the older routers as part of a VoIP system
planned for under the new technology plan, but that system was never built. Id. at 13-14
18 In 2001, in the Commitment Adjustment Implementation Order, the Commission established procedures
to recover funds disbursed to parties that obtained the funds in violation of the Commission’s E-rate
program rules. See Changes to the Board of Directors of the National Exchange Carrier Association, Inc.,
Federal-State Joint Board on Universal Service
, 15 FCC Rcd 22975, 22980, para. 11 (2001). At that time,
the Commission only authorized USAC to commence commitment adjustment recovery actions against the
service provider. See id.
3


Federal Communications Commission

DA 12-1797

6.
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), the requests for review filed by
Ysleta Independent School District, El Paso, Texas, and International Business Machines, Inc.
ARE GRANTED and ARE REMANDED to USAC for further action consistent with this order.
FEDERAL COMMUNICATIONS COMMISSION
Trent B. Harkrader
Chief
Telecommunications Access Policy Division
Wireline Competition Bureau
4

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