WCB Seeks Comment on SECA Equipment Bundling Petition
Federal Communications Commission
News Media Information 202 / 418-0500445 12th St., S.W.
Washington, D.C. 20554
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
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
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
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.
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.
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13 47 C.F.R. §§ 1.1200 et seq.
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For further information, please contact Cara Voth, Telecommunications Access Policy Division,
Wireline Competition Bureau at (202) 418-7400 or TTY (202) 418-7385.
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