§ 54.507   Cap.

   (a) Amount of the annual cap. The aggregate annual cap on federal universal
   service support for schools and libraries shall be $2.25 billion per funding
   year,  of  which $1 billion per funding year will be available for the
   category two services, as described in § 54.502(a)(2), unless demand for
   category one services is higher than available funding.

   (1) Inflation increase. 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)(2)
   of this section.

   (2) 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.

   (3) 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.

   (4) Filing window requests. At the close of the filing window, if requests
   for  category one services are greater than the available funding, the
   Administrator shall shift category two funds to provide support for category
   one services. If available funds are sufficient to meet demand for category
   one  services,  the  Administrator,  at  the direction of the Wireline
   Competition Bureau, shall direct the remaining additional funds to provide
   support for category two requests.

   (5) 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. The Chief, Wireline Competition Bureau, is
   delegated authority to determine the proportion of unused funds, if any,
   needed to meet category one demand, and to direct the Administrator to use
   any  remaining funds to provide support for category two requests. 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.

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

   (c) Requests. The Administrator shall implement an initial filing period
   that treats all schools and libraries filing an application within that
   period as if their applications were simultaneously received. The initial
   filing period shall begin and conclude on dates to be determined by the
   Administrator with the approval of the Chief of the Wireline Competition
   Bureau. The Administrator shall maintain on the Administrator's Web site a
   running tally of the funds already committed for the existing funding year.
   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. Implementation of non-recurring
   services may begin on April 1 prior to the July 1 start of the funding year.
   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) Rules of distribution. When the filing period described in paragraph (c)
   of this section closes, the Administrator shall calculate the total demand
   for both category one and category two support submitted by applicants
   during the filing period. If total demand for the funding year exceeds the
   total  support  available  for  category  one  or both categories, the
   Administrator shall take the following steps:

   (1) Category one. The Administrator shall first calculate the demand for
   category one services for all discount levels. The Administrator shall
   allocate the category one funds to these requests for support, beginning
   with  the  most  economically  disadvantaged schools and libraries, as
   determined by the schools and libraries discount matrix in § 54.505(c).
   Schools and libraries eligible for a 90 percent discount shall receive first
   priority for the category one funds. The Administrator shall next allocate
   funds toward the requests submitted by schools and libraries eligible for an
   80 percent discount, then for a 70 percent discount, and shall continue
   committing  funds  for category one services in the same manner to the
   applicants  at each descending discount level until there are no funds
   remaining.

   (2) Category two. The Administrator shall next calculate the demand for
   category two services for all discount categories as determined by the
   schools and libraries discount matrix in § 54.505(c). If that demand exceeds
   the category two budget for that funding year, the Administrator shall
   allocate  the  category two funds beginning with the most economically
   disadvantaged  schools and libraries, as determined by the schools and
   libraries discount matrix in § 54.505(c). The Administrator shall allocate
   funds toward the category two requests submitted by schools and libraries
   eligible for an 85 percent discount first, then for a 80 percent discount,
   and shall continue committing funds in the same manner to the applicants at
   each  descending  discount level until there are no category two funds
   remaining.

   (3)  To  the  extent  that there are single discount percentage levels
   associated with “shared services” under § 54.505(b)(4), the Administrator
   shall allocate funds to the applicants at each descending discount level
   (e.g., 90 percent, 89 percent, then 88 percent) until there are no funds
   remaining.

   (4) For both paragraphs (f)(1) and (2) of this section, if the remaining
   funds are not sufficient to support all of the funding requests within a
   particular discount level, the Administrator shall allocate funds at that
   discount level using the percentage of students eligible for the National
   School Lunch Program. Thus, if there is not enough support to fund all
   requests at the 40 percent discount level, the Administrator shall allocate
   funds beginning with those applicants with the highest percentage of NSLP
   eligibility for that discount level by funding those applicants with 19
   percent  NSLP eligibility, then 18 percent NSLP eligibility, and shall
   continue  committing  funds  in  the same manner to applicants at each
   descending percentage of NSLP until there are no funds remaining.

   (f) Rules of distribution. When the filing period described in paragraph (c)
   of this section closes, the Administrator shall calculate the total demand
   for both category one and category two support submitted by applicants
   during the filing period. If total demand for the funding year exceeds the
   total  support  available  for  category  one  or both categories, the
   Administrator shall take the following steps:

   (1) Category one. The Administrator shall first calculate the demand for
   category one services for all discount levels. The Administrator shall
   allocate the category one funds to these requests for support, beginning
   with  the  most  economically  disadvantaged schools and libraries, as
   determined by the schools and libraries discount matrix in § 54.505(c).
   Schools and libraries eligible for a 90 percent discount shall receive first
   priority for the category one funds. The Administrator shall next allocate
   funds toward the requests submitted by schools and libraries eligible for an
   80 percent discount, then for a 70 percent discount, and shall continue
   committing  funds  for category one services in the same manner to the
   applicants  at each descending discount level until there are no funds
   remaining.

   (2) Category two. The Administrator shall next calculate the demand for
   category two services for all discount categories as determined by the
   schools and libraries discount matrix in § 54.505(c). If that demand exceeds
   the category two budget for that funding year, the Administrator shall
   allocate  the  category two funds beginning with the most economically
   disadvantaged  schools and libraries, as determined by the schools and
   libraries discount matrix in § 54.505(c). The Administrator shall allocate
   funds toward the category two requests submitted by schools and libraries
   eligible for an 85 percent discount first, then for a 80 percent discount,
   and shall continue committing funds in the same manner to the applicants at
   each  descending  discount level until there are no category two funds
   remaining.

   (3)  To  the  extent  that there are single discount percentage levels
   associated with “shared services” under § 54.505(b)(4), the Administrator
   shall allocate funds to the applicants at each descending discount level
   (e.g., 90 percent, 89 percent, then 88 percent) until there are no funds
   remaining.

   (4) For both paragraphs (f)(1) and (2) of this section, if the remaining
   funds are not sufficient to support all of the funding requests within a
   particular discount level, the Administrator shall allocate funds at that
   discount level using the percentage of students eligible for the National
   School Lunch Program. Thus, if there is not enough support to fund all
   requests at the 40 percent discount level, the Administrator shall allocate
   funds beginning with those applicants with the highest percentage of NSLP
   eligibility for that discount level by funding those applicants with 19
   percent  NSLP eligibility, then 18 percent NSLP eligibility, and shall
   continue  committing  funds  in  the same manner to applicants at each
   descending percentage of NSLP until there are no funds remaining.

   [ 79 FR 49201 , Aug. 19, 2014, as amended at  80 FR 5990 , Feb. 4, 2015]

   Effective Date Note: At  79 FR 49201 , Aug. 19, 2014, § 54.507 was revised.
   However, paragraph (d) of this section contains information collection and
   recordkeeping requirements and will not become effective until approval has
   been given by the Office of Management and Budget.

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