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WCB Seeks Comment on SECA Equipment Bundling Petition

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Released: August 10, 2012

PUBLIC NOTICE

Federal Communications Commission

News Media Information 202 / 418-0500

445 12th St., S.W.

Internet: http://www.fcc.gov

Washington, D.C. 20554

TTY: 1-888-835-5322

DA 12-1325

Release Date: August 10, 2012

WIRELINE COMPETITION BUREAU SEEKS COMMENT ON A PETITION FILED BY THE

STATE E-RATE COORDINATORS’ ALLIANCE SEEKING CLARIFICATION REGARDING

THE ELIGIBILITY OF BUNDLED END USER EQUIPMENT

UNDER THE SCHOOLS AND LIBRARIES PROGRAM

CC Docket No. 02-6

Comment Date: September 10, 2012
Reply Comment Date: September 24, 2012

The Wireline Competition Bureau (Bureau) seeks comment on a petition filed by the State E-rate
Coordinators’ Alliance (SECA) asking for clarification on whether and to what extent the Commission’s
rules for E-rate (more formally known as the schools and libraries universal service support program)
permit service providers to bundle end-user devices and equipment that are ineligible for E-rate support
with E-rate eligible services without having to reduce the amount of an applicant’s E-rate funding request
by the cost of the ineligible end-user devices and equipment.1 More specifically, SECA is asking for
clarification of how the Commission’s long-standing policy requiring the cost allocation of ineligible end-
user equipment from eligible E-rate funding requests aligns with an order issued by the Bureau in
December 2010 (Clarification Order) that SECA alleges has been interpreted by some as allowing the
bundling of such devices without cost allocation.2
The Clarification Order addresses questions received by the Bureau regarding the Commission’s
decision in the Schools and Libraries Sixth Report and Order regarding, among other things, the E-rate
program gift rules.3 The Clarification Order specifies that “service providers cannot offer special
equipment discounts or equipment with service arrangements to E-rate recipients that are not currently
available to some other class of subscribers or segments of the public.”4 At the same time, the


1 Petition for Clarification Pertaining to the Eligibility of Free VoIP Handsets and Other End-User Equipment, State
E-rate Coordinators’ Alliance, CC Docket 02-6 and GN Docket No. 09-51, filed July 27. 2012 (SECA Petition).
2 SECA Petition; Schools and Libraries Universal Service Support Mechanism, A National Broadband Plan for Our
Future
, CC Docket No. 02-6, GN Docket No. 09-51, Order, 25 FCC Rcd 17324 (Wireline Comp. Bur. 2010)
(clarifying the funding procedures for basic maintenance of internal connections contracts and gifts
rules)(Clarification Order).
3 Order; Schools and Libraries Universal Service Support Mechanism, A National Broadband Plan for Our Future,
CC Docket No. 02-6, GN Docket No. 09-51, Sixth Report and Order, 25 FCC Rcd 18762 (2010) (Schools and
Libraries Sixth Report and Order
).
4Clarification Order, para. 11.

Clarification Order explains that because “many cell phones are free or available to the general public at
a discounted price with the purchase of a two-year service contract…[s]chools and libraries are free to
take advantage of these deals, without cost-allocation…”5 However, the Clarification Order further
states that schools and libraries “…cannot accept other equipment with service arrangements that are not
otherwise available to some segment of the public or class of users.”6 By way of example, the
Clarification Order explains that “a service provider may not offer free iPads to a school with the
purchase of telecommunications or Internet access services eligible under E-rate, if such an arrangement
is not currently available to the public or a designated class of subscribers.”7
SECA expresses support for the Bureau’s decision to exempt free cell phones from cost allocation
requirements when the phones are bundled with cellular service and available to the public or a certain
class of users.8 However, SECA expresses concern that “this exemption is now being used by service
providers to claim that their newly created service “bundles” for a variety of end user devices are
available to a broad class of customers and therefore are also eligible for E-rate.”9 SECA asks for
clarification on whether and to what extent such bundles are permitted without cost allocation.10 If other
bundles are permitted, SECA suggests that the Bureau’s guidance in the Clarification Order should be
further clarified and should specify that in order for ineligible equipment to be bundled with service and
exempted from cost allocation: 1) The cost of any end-user equipment provided as a part of a bundled
service must be considered “ancillary” relative to the cost of the bundle as a whole; 2) The bundled
service offering must be deemed a commercially common practice within the industry, not a unique
offering of an individual service provider; 3) The arrangement must be currently available to the public
and not just to a designated class of subscribers;11 and, 4) The service provider is not permitted to offer a
package or packages of equivalent eligible services, without bundled end-user equipment, at a lower
price.12
Pursuant to sections 1.415 and 1.419 of the Commission’s rules, 47 CFR §§ 1.415, 1.419,
interested parties may file comments and reply comments on or before the dates indicated on the first
page of this document. Comments may be filed using the Commission’s Electronic Comment Filing
System (ECFS). See Electronic Filing of Documents in Rulemaking Proceedings, 63 FR 24121 (1998).


5 Id., n.25.
6 Id.
7 Id.
8 SECA Petition at 1 (stating that the cost allocation exemption for cell phones has simplified the application process
for cellular telephone services, was based on a long standing industry commercial practice of cellular providers that
offered free cell phones to any customer that signed up for a new plan or extended an existing service plan, and is a
practice that pre-dated E-rate rules).
9 Id. at 3.
10 Id. at 3 (claiming that further expansion of exemptions from the Commission’s cost allocation requirements will
increase the demand for E-rate funding).
11 For example, SECA suggests that a special bundle available only to the K-12 market that is not available to all
other customers should not qualify for the cost allocation exemption. Id.
12 Id.
2

§
Electronic Filers: Comments may be filed electronically using the Internet by accessing the
ECFS: http://fjallfoss.fcc.gov/ecfs2/.
§
Paper Filers: Parties who choose to file by paper must file an original and one copy of each
filing. If more than one docket or rulemaking number appears in the caption of this proceeding,
filers must submit two additional copies for each additional docket or rulemaking number.
Filings can be sent by hand or messenger delivery, by commercial overnight courier, or by first-
class or overnight U.S. Postal Service mail. All filings must be addressed to the Commission’s
Secretary, Office of the Secretary, Federal Communications Commission.
§
All hand-delivered or messenger-delivered paper filings for the Commission’s Secretary
must be delivered to FCC Headquarters at 445 12th St., SW, Room TW-A325,
Washington, DC 20554. The filing hours are 8:00 a.m. to 7:00 p.m. All hand deliveries
must be held together with rubber bands or fasteners. Any envelopes and boxes must be
disposed of before entering the building.
§
Commercial overnight mail (other than U.S. Postal Service Express Mail and Priority
Mail) must be sent to 9300 East Hampton Drive, Capitol Heights, MD 20743.
§
U.S. Postal Service first-class, Express, and Priority mail must be addressed to 445 12th
Street, SW, Washington DC 20554.
People with Disabilities: To request materials in accessible formats for people with disabilities
(braille, large print, electronic files, audio format), send an e-mail to fcc504@fcc.gov or call the
Consumer & Governmental Affairs Bureau at 202-418-0530 (voice), 202-418-0432 (tty).
The proceeding this Notice initiates shall be treated as a “permit-but-disclose” proceeding in
accordance with the Commission’s ex parte rules.13 Persons making ex parte presentations must file a
copy of any written presentation or a memorandum summarizing any oral presentation within two
business days after the presentation (unless a different deadline applicable to the Sunshine period applies).
Persons making oral ex parte presentations are reminded that memoranda summarizing the presentation
must (1) list all persons attending or otherwise participating in the meeting at which the ex parte
presentation was made, and (2) summarize all data presented and arguments made during the
presentation. If the presentation consisted in whole or in part of the presentation of data or arguments
already reflected in the presenter’s written comments, memoranda or other filings in the proceeding, the
presenter may provide citations to such data or arguments in his or her prior comments, memoranda, or
other filings (specifying the relevant page and/or paragraph numbers where such data or arguments can be
found) in lieu of summarizing them in the memorandum. Documents shown or given to Commission
staff during ex parte meetings are deemed to be written ex parte presentations and must be filed
consistent with rule 1.1206(b). In proceedings governed by rule 1.49(f) or for which the Commission has
made available a method of electronic filing, written ex parte presentations and memoranda summarizing
oral ex parte presentations, and all attachments thereto, must be filed through the electronic comment


13 47 C.F.R. §§ 1.1200 et seq.
3

filing system available for that proceeding, and must be filed in their native format (e.g., .doc, .xml, .ppt,
searchable .pdf). Participants in this proceeding should familiarize themselves with the Commission’s ex
parte
rules.
For further information, please contact Cara Voth, Telecommunications Access Policy Division,
Wireline Competition Bureau at (202) 418-7400 or TTY (202) 418-7385.
- FCC -
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