§  54.507   Cap.

   (a) Amount of the annual cap. In funding year 2010 and subsequent
   funding years, the $2.25 billion funding cap on federal universal
   service support for schools and libraries shall be automatically
   increased annually to take into account increases in the rate of
   inflation as calculated in paragraph (a)(1) of this section.

   (1) Increase calculation. To measure increases in the rate of inflation
   for the purposes of this paragraph (a), the Commission shall use the
   Gross Domestic Product Chain-type Price Index (GDP-CPI). To compute the
   annual increase as required by this paragraph (a), the percentage
   increase in the GDP-CPI from the previous year will be used. For
   instance, the annual increase in the GDP-CPI from 2008 to 2009 would be
   used for the 2010 funding year. The increase shall be rounded to the
   nearest 0.1 percent by rounding 0.05 percent and above to the next
   higher 0.1 percent and otherwise rounding to the next lower 0.1
   percent. This percentage increase shall be added to the amount of the
   annual funding cap from the previous funding year. If the yearly
   average GDP-CPI decreases or stays the same, the annual funding cap
   shall remain the same as the previous year.

   (2) Public notice. When the calculation of the yearly average GDP-CPI
   is determined, the Wireline Competition Bureau shall publish a public
   notice in the   Federal Register   within 60 days announcing any
   increase of the annual funding cap based on the rate of inflation.

   (3) Amount of unused funds. All funds collected that are unused shall
   be carried forward into subsequent funding years for use in the schools
   and libraries support mechanism in accordance with the public interest
   and notwithstanding the annual cap.

   (i) The Administrator shall report to the Commission, on a quarterly
   basis, funding that is unused from prior years of the schools and
   libraries support mechanism.

   (ii) Application of unused funds. On an annual basis, in the second
   quarter of each calendar year, all funds that are collected and that
   are unused from prior years shall be available for use in the next full
   funding year of the schools and libraries mechanism in accordance with
   the public interest and notwithstanding the annual cap as described in
   this paragraph (a).

   (b) A funding year for purposes of the schools and libraries cap shall
   be the period July 1 through June 30.

   (c) Requests . Funds shall be available to fund discounts for eligible
   schools and libraries and consortia of such eligible entities on a
   first-come-first-served basis, with requests accepted beginning on the
   first of July prior to each funding year. The Administrator shall
   maintain on the Administrator's website a running tally of the funds
   already committed for the existing funding year. The Administrator
   shall implement an initial filing period that treats all schools and
   libraries filing within that period as if their applications were
   simultaneously received. The initial filing period shall begin on the
   date that the Administrator begins to receive applications for support,
   and shall conclude on a date to be determined by the Administrator. The
   Administrator may implement such additional filing periods as it deems
   necessary.

   (d) Annual filing requirement. Schools and libraries, and consortia of
   such eligible entities shall file new funding requests for each funding
   year no sooner than the July 1 prior to the start of that funding year.
   Schools, libraries, and eligible consortia must use recurring services
   for which discounts have been committed by the Administrator within the
   funding year for which the discounts were sought. The deadline for
   implementation of non-recurring services will be September 30 following
   the close of the funding year. An applicant may request and receive
   from the Administrator an extension of the implementation deadline for
   non-recurring services if it satisfies one of the following criteria:

   (1) The applicant's funding commitment decision letter is issued by the
   Administrator on or after March 1 of the funding year for which
   discounts are authorized;

   (2) The applicant receives a service provider change authorization or
   service substitution authorization from the Administrator on or after
   March 1 of the funding year for which discounts are authorized;

   (3) The applicant's service provider is unable to complete
   implementation for reasons beyond the service provider's control; or

   (4) The applicant's service provider is unwilling to complete
   installation because funding disbursements are delayed while the
   Administrator investigates their application for program compliance.

   (e) Long term contracts . If schools and libraries enter into long term
   contracts for eligible services, the Administrator shall only commit
   funds to cover the pro rata portion of such a long term contract
   scheduled to be delivered during the funding year for which universal
   service support is sought.

   (f) Date services must be supplied . The Administrator shall not
   approve funding for services received by a school or library before
   January 1, 1998.

   (g) Rules of priority. The Administrator shall act in accordance with
   paragraph (g)(1) of this section with respect to applicants that file
   an FCC Form 471, as described in §  54.504(a), when a filing period
   described in paragraph (c) of this section is in effect. The
   Administrator shall act in accordance with paragraph (g)(2) of this
   section with respect to applicants that file an FCC Form 471, as
   described in §  54.504(a), at all times other than within a filing
   period described in paragraph (c) of this section.

   (1) When the filing period described in paragraph (c) of this section
   closes, the Administrator shall calculate the total demand for support
   submitted by applicants during the filing period. If total demand
   exceeds the total support available for that funding year, the
   Administrator shall take the following steps:

   (i) The Administrator shall first calculate the demand for services
   listed under the telecommunications services, telecommunications, and
   Internet access categories on the eligible services list for all
   discount levels, as determined by the schools and libraries discount
   matrix in §  54.505(c). These services shall receive first priority for
   the available funding.

   (ii) The Administrator shall then calculate the amount of available
   funding remaining after providing support for the telecommunications
   and Internet access categories for all discount levels. The
   Administrator shall allocate the remaining funds to the requests for
   support for internal connections, beginning with the most economically
   disadvantaged schools and libraries, as determined by the schools and
   libraries discount matrix in §  54.505(c) of this part. Schools and
   libraries eligible for a 90 percent discount shall receive first
   priority for the remaining funds, and those funds will be applied to
   their requests for internal connections.

   (iii) To the extent that funds remain after the allocation described in
   § §  54.507(g)(1)(i) and (ii), the Administrator shall next allocate
   funds toward the requests for internal connections submitted by schools
   and libraries eligible for an 80 percent discount, then for a 70
   percent discount, and shall continue committing funds for internal
   connections in the same manner to the applicants at each descending
   discount level until there are no funds remaining.

   Note to paragraph ( g )(1)( iii ): To the extent that there are single
   discount percentage levels associated with “shared services” under
   §  54.505(b)(4), the Administrator shall allocate funds for internal
   connections beginning at the ninety percent discount level, then for
   the eighty-nine percent discount, then for the eighty-eight percent
   discount, and shall continue committing funds for internal connections
   in the same manner to the applicants at each descending discount level
   until there are no funds remaining.

   (iv) If the remaining funds are not sufficient to support all of the
   funding requests within a particular discount level, Schools and
   Libraries Corporation shall divide the total amount of remaining
   support available by the amount of support requested within the
   particular discount level to produce a pro-rata factor. Schools and
   Libraries Corporation shall reduce the support level for each applicant
   within the particular discount level, by multiplying each applicant's
   requested amount of support by the pro-rata factor.

   (v) Schools and Libraries Corporation shall commit funds to all
   applicants consistent with the calculations described herein.

   (2) Rules of priority . When expenditures in any funding year reach the
   level where only $250 million remains before the cap will be reached,
   funds shall be distributed in accordance to the following rules of
   priority:

   (i) The Administrator or the Administrator's subcontractor shall post a
   message on the Administrator's website, notify the Commission, and take
   reasonable steps to notify the educational and library communities that
   commitments for the remaining $250 million of support will only be made
   to the most economically disadvantaged schools and libraries (those in
   the two most disadvantaged categories) for the next 30 days or the
   remainder of the funding year, whichever is shorter.

   (ii) The most economically disadvantaged schools and libraries (those
   in the two most disadvantaged categories) that have not received
   discounts from the universal service support mechanism in the previous
   or current funding years shall have exclusive rights to secure
   commitments for universal service support under this subpart for a
   30-day period or the remainder of the funding year, whichever is
   shorter. If such schools and libraries have received universal service
   support only for basic telephone service in the previous or current
   funding years, they shall remain eligible for the highest priority once
   spending commitments leave only $250 million remaining before the
   funding cap is reached.

   (iii) Other economically disadvantaged schools and libraries (those in
   the two most disadvantaged categories) that have received discounts
   from the universal service support mechanism in the previous or current
   funding years shall have the next highest priority, if additional funds
   are available at the end of the 30-day period or the funding year,
   whichever is shorter.

   (iv) After all requests submitted by schools and libraries described in
   paragraphs (g)(2) and (g)(3) of this section during the 30-day period
   have been met, the Administrator shall allocate the remaining available
   funds to all other eligible schools and libraries in the order in which
   their requests have been received by the Administrator, until the $250
   million is exhausted or the funding year ends.

   [ 62 FR 32948 , June 17, 1997]

   Editorial Note: For   Federal Register   citations affecting §  54.507,
   see the List of CFR Sections Affected, which appears in the Finding
   Aids section of the printed volume and at www.fdsys.gov .

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