Before the FEDERAL COMMUNICATIONS COMMISSION

Washington, D.C. 20554

In the Matter of Federal-State Joint Board

CC Docket No. 96-45 on Universal Service

To the Joint Board:

Summary

The Education and Library Network Coalition ("EDLINC"), a coalition of groups representing public and private schools and libraries, urges the Joint Board and the Commission to establish a standard of service and a discount methodology for schools and libraries that will fulfill the intent of Congress by delivering the full benefit of advanced telecommunications to schools and libraries everywhere in the country at affordable prices.

Current rates for the telecommunications services that schools and libraries need to obtain access to telecommunications services are extremely high in proportion to school and library budgets. The fairest and most effective way to ensure affordable rates for schools and libraries is to establish a national competitive benchmark rate as the basis for a discounted price. This ensures that rates are not computed on an artificially high base and gives all users the benefit of a competitive market rate, even in areas where there is no competition.

All services or functionalities should be eligible for discounts. The FCC is not equipped to decide what services or functionalities best suit the needs of each school or library in the country. The simplest and fairest approach is to make every service and functionality that is commercially available anywhere in the country available at a discount.

Section 254(h) contemplates that internal connections to classrooms are eligible for universal service support, because it must be read in conjunction with Section 254(c)(3), which states that universal service support is to be available "for the purposes of subsection (h)." The legislative history of Section 254(h) plainly states that one purpose of subsection (h) as a whole is to ensure that classrooms have access to modern telecommunications services and advanced telecommunications services.

Congress did not intend the Commission to use Section 706 to replace Section 254(h) to provide discounted affordable access to switched broadband technology or connections to classrooms within its definition of special services. Section 708 also should not be relied on as a means of supporting universal service or of funding advanced services.

EDLINC's proposal, which would allow any telecommunications service provider to respond to requests for proposals from schools and libraries, would promote competition. An effective subsidy mechanism that ensures that schools and libraries have the ability to sustain their use of telecommunications services over the long term will entice new providers into what could become an enormous new market niche. A bid mechanism will also encourage the participation of the lowest cost providers. The resale prohibition of Section 254(h)(3) should be construed as narrowly as possible to encourage the growth of new networks and aggregation of purchasing power. The Commission should permit end-user cost-based fees for services and should prohibit only resale of services to the public for profit.

Encouraging the growth of community-based consortia is a highly effective means of ensuring that schools and libraries have access to affordable telecommunications services. Therefore, discounts should be available to such consortia as a whole so long as they are not clearly and directly violating the prohibition on resale to the public for profit.

Congress did not authorize a block grant program, a voucher program, or direct billing credits. The 1996 Act allows only for actual discounts on rates for services used by schools and libraries. Any other method would not ensure affordability and would not constitute universal service.

The Commission should not impose any administrative requirements on requests for service. Schools and libraries already comply with procurement procedures designed to ensure that public funds are not spent without proper authorization. If a service provider has doubts about an institution's status or accreditation, it can inquire at the state board of education or a similar agency, but there should be a presumption that any institution requesting service is authorized to obtain it.

The discounted rates for schools and libraries should be based on national competitive benchmark prices. The benchmark prices could be based on rates paid by schools and libraries in areas in which there is market competition; on the lowest commercially-available rate; or on the total service long-run incremental cost.

The discount itself should be calculated by ranking each school district in a state using a combination of factors designed to ensure affordability. The discount available to a school district would vary from 30% to 70%, and would be proportional to the school's final ranking after all the factors have been considered.

Any current discounts that happen to be lower than the discounts calculated under the above method should remain in place. Those discounts are presumptively reasonable or they would not have been available in the first place. It would be ironic if the adoption of regulations intended to ensure affordable access to telecommunications would cause a user's rates for those services to increase.

Attached as Table B is information regarding current state discount programs.

In addition to the discount described above, certain schools and libraries may find that they require additional discounts. State PUC's should have the authority to establish such additional discounts, if a school can demonstrate that its telecommunications costs exceed 1% of its total revenues. Currently, schools spend about 1.3% of their budgets on technology, including telecommunications, so a school that is spending more than 1% is probably spending substantially more than average. The appropriate percentage for libraries may be different. Service providers would receive additional reimbursements for such supplemental discounts; the state universal service mechanism would contribute one-third of that amount, and the federal mechanism would contribute two-thirds.

No existing model is needed to determine whether a school or library should receive a supplemental discount. If the percentage of revenue test is met, that should be sufficient.

The supplemental discounts could be made available under either a sliding scale or step approach.

Separate funding mechanisms are not needed for schools, libraries and rural health care providers. The law does not contemplate separate mechanisms. The only thing that matters is that total contributions are sufficient to meet total obligations.

EDLINC does not believe it is practical for the industry to develop a final model within the timeline required by the 1996 Act, and any attempt to do so would lead to unnecessary delay.

The Commission should adopt different proxy models for core services and services to schools and libraries. The Joint Board currently has ample information regarding the costs of providing services to schools and libraries, but attempting to fit the full range of special services into a proxy model designed to address core services would lead to distortion and inaccuracies. Therefore, the two areas should be kept separate, at least until the network for special services has been built out.

Finally, the Joint Board should urge the Commission to fully implement the intent of the 1996 Act by giving schools and libraries access to the broadest possible range of services at affordable prices.

Table of Contents

Summary
Introduction
Question 1
Question 2
Question 3
Question 6
Question 7
Question 8
Question 9
Question 10
Question 11
Question 12
Question 13
Question 14
Question 15
Question 16
Question 17
Question 18
Question 19
Question 20
Question 21
Question 22
Question 23
Question 24
Question 25
Question 35
Question 39

Conclusion

Before the FEDERAL COMMUNICATIONS COMMISSION

Washington, D.C.20554

In the Matter of Federal-State Joint Board

CC Docket No. 96-45 on Universal Service

To the Joint Board:


Introduction

The Education and Library Network Coalition ("EDLINC") is a coalition of groups representing public and private schools and libraries, whose members are identified at Exhibit A. This coalition filed comments and reply comments in response to the Notice of Proposed Rulemaking and Order Establishing the Joint Board (the "NPRM") under the name of National School Boards Association et al., and hereby submits answers to some of the questions put by the Joint Board in its Public Notice released July 3, 1996. We again urge the Commission to establish a standard of service to schools and libraries that will provide the full benefit of advanced telecommunications at the most affordable price.

Definitions Issues

1. Is it appropriate to assume that current rates for services included within the definition of universal service are affordable, despite variations among companies and service areas?

Answer: Current rates for the telecommunications services schools and libraries need to provide educational opportunities for students and library patrons are not affordable, for two reasons. First, the vast majority of school districts and libraries currently pay commercial rates for services. Second, schools and libraries operate under extremely tight budgets.

If services were currently affordable for schools and libraries, the growing demand for technology in the classroom would have led more schools and libraries to obtain those services. As recent studies show, however, schools and libraries currently do not have the levels of technology needed to provide students and library patrons with the training and opportunities they need:

• Only 9% of classrooms have access to the Internet for instructional purposes. The lack of funding has been cited as one of the biggest barriers to acquiring more telecommunications services.¹ For private schools, 61% cited lack of funds as a major barrier.²
• Only 12% of classrooms have telephones.³
• Only 1.4% of schools have higher speed connections useful for such applications as distance learning.⁴
• Only 23.3% of public libraries are able to offer direct access to the World Wide Web.⁵
• Only 4% of private schools class rooms have Internet access, and only 3% have ISDN or equivalent high speed capability.
  

1. The Chittenden South School District in Hinesburg, VT, a rural district with four K-8 schools and one high school totaling 4,000 students, needs to upgrade their school district wide network. The network currently has 1,200 computers on line for students served by a T-1 line and several 56k lines. The cost of the T-1 line is $13,000 per year. The cost of a 56 Kbs line is $400 per month/per school. They have been unable to purchase needed additional T-1 lines because of the exorbitant annual cost. The provider company has indicated that they are prohibited from negotiating a more affordable rates for the district. Chittenden will be unable to keep pace with the growing demand on their network unless that cost is reduced.
   
2. The San Francisco Unified School District has 110 schools. 55 of those schools are connected via a T-1 line. T-1 lines are running $10,000 per year. Internet access is $300,000 per year and the total annual costs for dial-tone throughout the district is $2,000,000. The Oakland United School District also spends $2 million per year on telephone bill expanses.
   
3. In Nebraska, most school districts have negotiated 56Kbs rate that average $125/site/month. However, several towns in Nebraska including Kearney and Neligh have been unable to obtain an affordable rate and face monthly charges of $350/site. In addition, many local rural schools are relying on local dial up lines to connect with the 56Kbs hubs. They need to obtain additional phone lines for this purpose but most must pay high business rates of $45- 60/line/month.
   
4. Cost of connection was listed as the most important factor affecting public library involvement with the Internet in a 1994 National Commission on Libraries and Information Science report, Public Libraries and the Internet (June 1994, Figure 5). In March of this year, a public librarian in Bristol, Virginia, reported that their connection is a 56 Kb line, which is slow when using the World Wide Web. The cost for this service is $9200 for access to the Virginia Library Information Network ("VLIN") and an additional $1200 for individual VLIN user accounts. The library would prefer to use a much faster (T1) connection, if the price were lower.⁶
   
5. According to the National Center for Education Statistics about 40% of public libraries had annual operating expenditures of less than $50,000. 54% of public libraries had annual operating expenditures of less than $100,000. Only 9.6% of public libraries had annual operating expenditures of $1,000,000 or more. Using numbers from the Digest of Education Statistics, 1995, over 52% of public libraries are in non-metropolitan areas. This illustrates that most libraries would be hard-pressed to pay current tariffed rates for telecommunications services. A $10,000 T-1 line would represent over 10% of the budget of most libraries in the country.
   

With the demonstrated fiscal pressures on schools and libraries, cost shifting within school and library budgets will not be able to cover new costs of telecommunications services. In addition, within lean school budgets, only 9.7% of funding goes to general and school administration.⁹ These budgetary realities make it even more apparent that current rates for services for schools and libraries are and will remain, unaffordable.

2. To what extent should non-rate factors, such as subscribership level, telephone expenditures as a percentage of income, cost of living, or local calling area size be considered in determining the affordability and reasonable comparability of rates?

Answer: As further discussed below in our answer to Questions 16 and 20, non-rate factors must be considered in determining the affordability of rates. Population density, household income and the percentage of revenues devoted to telecommunications costs are all factors that affect the affordability of telecommunications services, and should be taken into account in comparing and setting rates.

3. When making the "affordability" determination required by Section 254(i) of the Act, what are the advantages and disadvantages of using a specific national benchmark rate for core services in a proxy model?

Answer: Although this question is directed at core services, we would like to address the advantages of a national benchmark rate for special services for schools and libraries, as well. The advantage of a national benchmark rate is that it can be based on rates in competitive markets, which are presumably the lowest rates possible, assuming there are no market distortions or other anomalies at work. This ensures that rates will not be computed from an artificially high base, which could give the appearance of providing a substantial discount, while not actually assuring affordability for many users. Thus, by establishing a relatively low rate as the basis for further reduction, a national benchmark helps ensure that the final discounted rate is as low as possible.

Use of a national benchmark also puts downward pressure on rates in areas that may above the benchmark, since it will be in the service provider's interest to avoid a situation in which the universal service fund does not fully reimburse its costs. Over the long run, this downward pressure can lead to further reduction in the benchmark rate itself, thus further lowering discounted rates and increasing affordability. For a more complete discussion of this issue in the context of schools and libraries, see our answer to Question 16.

Schools, Libraries, Health Care Providers

6. Should the services or functionalities eligible for discounts be specifically limited and identified, or should the discount apply to all available services?

Answer: All services or functionalities should be eligible for discounts. The FCC is ill- equipped to distinguish which services or functionalities should be discounted for each of the nation's schools and libraries. The telecommunications needs of a tiny, remote Texas school district which must pool resources with equally tiny, remote districts and community colleges to provide any advanced courses will differ significantly from a suburban school steeped in advanced technology, which provides research data and analysis to the Department of Energy. Likewise, the telecommunications needs of an Alaskan village school which cannot be reached by road will differ significantly from those of a crumbling inner-city school filled with asbestos. And the telecommunications needs of schools serving challenged populations may differ from all of the above. Similarly, libraries serve diverse communities and will not all want or need the same services.
Having a range of services available at different prices will ensure that schools and libraries make decisions based upon their needs and the economic implications of those decisions. If schools and libraries are forced to choose among a few services available at a discount, no matter whether or not they are appropriate for their circumstances, resources may be misspent and neither the institutions nor their clients will reap the benefits of the telecommunications revolution.

We also urge the Commission to consider adopting an approach in which unbundled network elements would be eligible for discounts. This would encourage the development of a truly functionality-based mechanism, in which schools and libraries could determine the functionalities they need and prepare requests for proposals based on those functionalities, which a variety of service providers could bid on, either singly or in consortia.
In short, if a service or functionality is commercially available anywhere in the country, it should be discounted. Schools and libraries on the cutting edge blaze a trail for those who are not as advanced, but others seek desperately to catch up only to face rates that are unaffordable. Given the rate of technological evolution, a list of defined services or functionalities to be discounted would likely include outdated services before it could even be widely distributed and it would take too much time and deliberation to keep the list current.

7. Does Section 254(h) contemplate that inside wiring or other internal connections to classrooms may be eligible for universal service support of telecommunications services provided to schools and libraries? If so, what is the estimated cost of the inside wiring and other internal connections?

Answer: Section 254(h) does contemplate that internal connections to classrooms will be eligible for universal service support. Section 254(h) must be read in conjunction with Section 254(c)(3), which states that "the Commission may designate additional services . . . for schools, libraries and health care providers for the purposes of subsection (h)." Thus, the Commission has broad authority to determine what services constitute "special services" under Section 254(c), and in defining those services, the Commission is to consider the purposes of Section 254(h). To determine the purposes of Section 254(h) with respect to schools and libraries, we must examine both Section 254(h)(1)(B) and Section 254(h)(2), and the legislative history.

Section 254(h)(1)(B) provides that universal service support is to be available for all services falling "within the definition of universal service under subsection (c)(3)" -- that is, all "special services." Section 254(h)(2) directs the Commission to adopt additional regulatory measures, outside the universal service mechanism of Section 254(h)(1)(B), to enhance access to advanced telecommunications for all classrooms, health care providers and libraries. Thus, Section 254(h) taken as a whole has the general purpose of advancing access to advanced telecommunications for schools and libraries, including classrooms. In addition, the Conference Report on the Telecommunications Act of 1996 states that:

New subsection (h) . . . is intended to ensure that . . . elementary and secondary school classrooms, and libraries have access to modern telecommunications services that will enable them to provide media and educational services to all parts of the nation. The ability of K-12 classrooms, libraries and rural health care providers to obtain access to advanced telecommunications services is critical to ensuring that these services are available on a universal basis.

In addition, we wish to emphasize that the use of the term "advanced services" in Section 254(h)(2) does not mean that a so-called advance service cannot also be a "special service" under Section 254(c)(3). Section 254(h)(2) directs the Commission to adopt regulatory measures that will "enhance . . . access" to advanced services. Presumably, the term "advanced services" was used to include new services that have not yet been developed. Those new advanced services may later be incorporated into the definition of special services, since those services would be within the "purposes of subsection (h)" required for designation as a special service. Thus, the Commission is to promote the growth of new services as well as ensure access to existing services.

Finally, the Conference Report not only supports our view that Section 254(h)(2) is directed at regulatory measures to promote advanced services, but indicates that advanced services may be included among the services eligible for universal service support:

New subsection (h)(2) requires the Commission to establish rules to enhance the availability of advanced telecommunications and information services to public institutional telecommunications users. For example, the Commission could determine that telecommunications and information services that constitute universal service for classrooms and libraries shall include dedicated data links and the ability to obtain access to education materials, research information, statistics, information on Government services, reports developed by Federal state and local governments, and information services which can be carried over the Internet.

Therefore, there can be no doubt that Congress intended that the Commission include connections to classrooms in the new universal service mechanism established by Section 254(h).

The only current figures we have regarding the cost of connecting classrooms are derived from the KickStart Report. KickStart indicates that initial deployment of connections within schools could cost up to $6.11 billion, with annual operation and maintenance costs of $0.56 billion thereafter. We are currently attempting to gather additional information regarding those costs, and will provide it when it is available.

8. To what extent should the provisions of Sections 706 and 708 be considered by the Joint Board and be relied upon to provide advanced services to schools, libraries and health care providers?

Answer: Section 706 of the 1996 Act directs the Commission and the states to "encourage the deployment on a reasonable and timely basis of advanced telecommunications capability to all Americans," including schools and classrooms. "Advanced telecommunications capability" is defined to mean, essentially, switched broadband technology, as proposed in our Comments at p. 14. Section 706 thus lends further support for the proposal put forth in our Comments and our answer to Question 7, above. Congress intends for the Commission and the states to provide switched broadband technology to every classroom in the country, and has given the Commission broad authority and flexibility in choosing the means by which that goal is achieved. Nothing in Section 706 is inconsistent with the notion that the Commission should include connections to classrooms or switched broadband technology in its definition of special services under Section 254. Furthermore, since providing those capabilities is clearly a Congressional goal, the Commission should use universal service as a mechanism for meeting that goal, so long as it is in a manner that is consistent with the public interest, convenience and necessity. In any case, Congress did not intend for Section 706 to replace the use of 245(h) to provide discounted, affordable access to switched broadband technology or connections to classrooms within its definition of special services.

Section 708 allows the National Education Technology Funding Corporation (the "NETFC") to receive federal funds for the purpose of stimulating private investment in educational networks and technology infrastructure and providing loans and grants to aid the development of such networks and infrastructure. This section should be relied upon by the Commission to complement the provisions of Section 254(h) and 254(c), not to replace or supersede them. For example, Sections 254(c)(3) and 254(h) provide for the provision of universal service support to schools and libraries, but that support is limited to connections to classrooms and schools and libraries. Universal service support does not include computing equipment, software, training and other areas that must be addressed if the new networks to be developed under Section 254 are to be truly useful. Section 708 offers a means for providing such technology, and the Corporation should use its funds to provide those additional types of services and equipment. On the other hand, Section 708 does not refer to "advanced services," and by its terms includes the whole field of educational technology. Thus, Section 708 should not be relied on as a means of supporting the universal service fund or of funding advanced services. Finally, the NETFC does not currently have any funds that could be used to implement the goals of Section 254(h), and implementation should not be delayed until the NETFC does have funding.

9. How can universal service support for schools, libraries, and health care providers be structured to promote competition?

Answer: The Joint Board and the Commission can use universal service support for schools, libraries and health care providers to further competition by adopting EDLINC's proposal. A universal service mechanism that allows providers to win the right to serve particular school or library districts (or larger aggregations of users) to provide any services or functionalities the user may require will encourage the growth of small service providers and undercut existing monopolies.

For example, by allowing a user to solicit bids from any interested service provider to fulfill a particular function, and further guaranteeing the winning bidder steady cash flow and a profit through the combination of the user's payments and the universal service fund payments, low cost providers will be encouraged to submit the lowest possible bids. In many cases -- such as in the use of wireless technology to avoid asbestos removal costs or to reach remote areas -- alternative providers may be able to serve a school or library user more cost effectively than incumbent local exchange carriers. If this proves to be the case, those alternative providers will have gained a foothold in a particular geographic region, from which they may be able to expand by serving other, noneducational users. Thus, our proposal offers the dual benefit of providing competition to incumbent carriers and encouraging the growth of small carriers and alternative technologies.

Therefore, universal service support should be structured to permit all potential users to solicit bids from as many interested providers as possible, with a minimum of administrative obstacles. In addition, universal service support should be available to any entity that has been awarded a contract to deliver a covered service to an eligible user.

10. Should the resale prohibition in Section 254(h)(3) be construed to prohibit only the resale of services to the public for profit, and should it be construed so as to permit end-user cost based fees for services? Would construction in this manner facilitate community networks and/or aggregation of purchasing power?

Answer: The resale prohibition should only apply to resale for profit, and should permit end-user cost-based fees for services. By interpreting the prohibition narrowly, the Commission would further support and encourage the development and proliferation of community and civic cooperatives by allowing the aggregation of purchasing power. The comments filed by the Lincoln Trail Libraries System describe a typical library cooperative, as found in several states:

Lincoln Trail Libraries System is a state-sponsored organization serving the libraries of 116 members in East Central Illinois. Academic, public, school, and special libraries participate as members. Lincoln Trail member facilities are spread over approximately 250 buildings in a nine-county area. This area is largely rural. The median population served for participating school districts is 795, and the median size for participating public libraries is 3,042. The median budget of all participating libraries is $54,000, with some annual budgets falling below $10,000 per year.¹⁰

Furthermore, the rules regarding resale should distinguish between the telecommunication facilities and services offered using those facilities. In its earlier comments, the Washington State Library suggested that:

[T]he FCC should seriously consider separating the telecommunications mechanisms that make an electronically based service possible (the tool) from the service itself (the product) in applying the 'no resale' prohibition. For instance, a library may not resell its discounted access to its city government, but it may levy a fee for Internet classes, or setting up and maintaining an Internet account through the library, or for maintaining a web site for its unit of local government. Such an application would appear to satisfy the intent of the Telecommunications Act, but this distinction would be more easily known and understood by all concerned if the FCC clarifies it.¹¹

Answer: One of the primary goals of the Act is to ensure that educational institutions and libraries have access to affordable telecommunications services. We believe that encouraging the growth of community-based consortia which include libraries and schools is one highly effective method of furthering this goal.

These consortia further the goals of the Act in several different ways. The broad consortium approach to community networking enhances the educational potential of the network by including partners and resources that might not otherwise be available. By providing access to their resources, community network partners (such as universities, local government, and local businesses) amplify the educational benefits of the network above and beyond that which schools and libraries could provide on their own. For instance, consortia might provide all members with access to the resources of the local university library, as well as provide access to important information on local government.

The Commission rules in this proceeding should encourage institutions to contribute their resources to the educational efforts of schools and libraries. In addition to the obvious educational benefits of these resources, access to this information can help build civic participation and interest by enabling all members of a consortium to access important information.

Consortia also improve the ability of schools and libraries to get access to the sophisticated telecommunications services they need. Aggregate purchasing of services not only leads to lower prices for schools and libraries but also enables schools and libraries to pool the demand in areas where local providers might be reluctant to offer sophisticated telecommunications services. This aggregation of community demand has proven an effective method for attracting telecommunications services in many underserved communities across the country.

Aggregation has also led in many cases to the purchasing of package deals which include services that, while furthering the telecommunications goals of the educational entities, might not be eligible for discounts under the Act. In these arrangements, schools are better able to serve their constituencies because of the mix of partners in the consortium and the broad variety of services that these partners need.

Finally, consortia are better equipped to deal with the ongoing costs of financing and supporting a telecommunications service. While the ongoing technical support and training costs associated with a network might be more than a school can support on its own, distributing these costs among the members of a consortium is a proven method of supporting these ongoing costs.

12. Should discounts be directed to the states in the form of block grants?

Answer: No. Although block grants might be considered an advantage in the short term, since they would provide schools with funds to "jump start" their telecommunications programs, in the long term schools will be better served by a true discount program. Under a block grant approach, schools and libraries will be unable to sustain their telecommunications initiatives for the long haul, for two reasons. First, once the initial funds have been distributed users will again be faced with unaffordable rates. Second, users will be unable to plan for future use -- not to mention expansion -- because they will not know with any certainty how much funding they will have to pay for future telecommunications needs.

A true discount program, on the other hand, would encourage competition and diversification in the industry, because the educational market would be treated as a new niche. Schools and libraries have specific needs, different from those of other users, and the size of the educational market would encourage a large number of providers to try to deliver the specialized services the market requires. Thus, a long-term discount program will encourage the development of an entire new industry segment.

In addition, for the reasons stated in our Reply Comments at pp. 6-8, Section 254(h) does not permit the use of a block grant mechanism. The law requires discounts on rates paid by schools and libraries. The law also calls for reimbursement to carriers, not to the institution requesting service. The law says nothing about channelling money through the states, or about capping the amount of money available. Congress is fully aware of the difference between "universal service" and a block grant, and the law calls for universal service, not block grants.

Finally, a block grant program would not achieve the goal of universal service. Instead, it would merely aid those institutions that put together the best grant applications -- generally, those institutions would be those that already have ample resources.

13. Should discounts for schools, libraries, and health care providers take the form of direct billing credits for telecommunications services provided to eligible institutions?

Answer: Discounts for schools and libraries should take only one form: true discounts. A discount is a reduction in the price of something; a credit is the application of a sum towards an existing debt or account. While they may have the same effect in some circumstances, they are not the same thing.

In addition, the use of billing credits would undermine the purposes of Section 254. The statute calls for approving universal service; it does not call for establishing a set fund that will then be used to give institutions vouchers or chits that they can use to defray some of the costs of obtaining telecommunications services. The law calls for schools and libraries to get discounts, which means that they should receive lower rates on all services that are covered by Section 254(c)(3) that they may request. Congress is very familiar with voucher programs and if the intention had been to establish a mechanism under which schools and libraries received credits which they could then apply towards the cost of services, Congress could and would have said so.

Furthermore, vouchers do not ensure the affordability of services, which is what Congress intended -- indeed, affordability is the hallmark of any universal service plan. Congress did not intend to create a capped entitlement or a grant-in- aid program, but to ensure affordable access, which means discounts off all rates for eligible services. Vouchers would be useless if applied to a high commercial tariff or other inflated price.
Vouchers also do not address the different functionalities that different schools need. Schools will decide on their own what services and functionalities they need -- vouchers applicable to a set list of services will not give all schools the flexibility they require in establishing their telecommunications plans. All schools do not need or want all services equally. Discounted rates, on the other hand, will give all schools the benefits they need, across the board. Vouchers will offer only targeted benefits, and may actually be mistargeted.

Finally, the distribution of vouchers is likely to put the Commission and the Joint Board squarely in the middle of a very visible dispute over the formula used to determine who gets the vouchers and how much they will be worth. This would be foolish, especially when the fight could be avoided simply by complying with the intent and letter of the law.

14. If the discounts are disbursed as block grants to states or as direct billing credits for schools, libraries, and health care providers, what, if any, measures should be implemented to assure that the funds allocated for discounts are used for their intended purposes?

Answer: No such measures should be taken, because neither block grants nor direct billing credits should be adopted. Both alternatives violate the terms of the statute and should be rejected. Schools and libraries are entitled to true discounts from the competitive price for all services covered by Section 254(c)(3). Indeed, the potential for fraud that appears to motivate the Joint Board's questions would be completely avoided if schools and libraries were given the right to procure services at discounted rates, as required by the law, because there would be no funds or monetary equivalent to be misapplied. The user would pay the entire discounted price to the provider, and the provider would receive the balance from the universal service fund. Finally, the likelihood of fraud is so small as to be inconsequential.

15. What is the least administratively burdensome requirement that could be used to ensure that requests for supported telecommunications services are bona fide requests within the intent of section 254(h)?

Answer: A telecommunications provider may be faced with up to three levels of requests, assuming that the Commission permits liberal aggregation of demand. These levels are: (1) individuals schools or libraries, or school or library districts, (2) regional education agencies, and (3) statewide agency requests. At each level there are procurement procedures that ensure that any requests for telecommunications services are bona fide. Under state and local law, schools and libraries must comply with certain procedures and procure telecommunications services, just as they must for any other kind of service. The Commission should not make the mistake of believing that telecommunications services are somehow unique: Schools and libraries procure a wide variety of goods and services every day, and the various procurement procedures of each district or other agency will ensure that any request is legitimate. Eligible institutions should be treated under the law just as any other customer requesting services -- if they request services, services should be provided. If a service provider has reason to doubt that a particular request has been submitted by an eligible institution, there is a very simple means of determining whether the requestor is entitled to the discount: state boards of education maintain lists of all the institutions that are considered "schools" for purposes of receiving state and federal funding, including as defined at Section 254(h)(5)(A). Similar lists are maintained for libraries. A simple query to the appropriate state-level agency would be enough to clear up any doubts in the rare case that there was a question.

16. What should be the base service prices to which discounts for schools and libraries are applied: (a) total service long-run incremental cost; (b) short-run incremental costs; (c) best commercially-available rate; (d) tariffed rate; (e) rate established through a competitively-bid contract in which schools and libraries participate; (f) lowest of some group of the above; or (g) some other benchmark? How could the best commercially-available rate be ascertained, in light of the fact that many such rates may be established pursuant to confidential contractual arrangements?

Answer: Section 254(h)(1)(B) states that the amount of the discount for schools and libraries must be enough "to ensure affordable access" to telecommunications services. For this to be the case, it is absolutely essential that the base price to which discounts are applied is as low as possible. In theory, the most accurate means of finding the lowest base price that ensures that a service provider recovers its costs and earns a reasonable profit is to determine the competitive market price. As EDLINC stated in its Comments and Reply Comments, the competitive market price or a surrogate for that price should be used as the basis for establishing a national benchmark for computing discounts everywhere in the country. Benchmark prices could be determined for particular services, but we would urge the Commission to consider adopting an approach in which unbundled network elements would be eligible for discounts. This would encourage the development of a true functionality-based mechanism, in which schools and libraries could determine the functionalities they need and prepare requests for proposals based on those functionalities, which a variety of service providers could bid on, either singly or in consortia.

It should be relatively simple to base the national benchmark on a survey of prices paid by schools and libraries in large suburban school districts, where there is likely to be competition for a full range of telecommunications services. This information should not be difficult to obtain, and as more schools enter into agreements the database can be expanded and refined. If such information is not available or is determined to be insufficient, then the lowest commercially- available rate should be used. The fact that such rates may be established pursuant to confidential contractual arrangements should not be a concern. Some rates will be public as required by Section 203 of the Communications Act and MCI v. AT&T, 114 S.Ct. 2223 (1994). In other cases, the Commission may condition forbearance pursuant to Section 10 of the Communications Act, as added by the 1996 Act, on the making available of such rate data for this purpose. Moreover, the Commission has the authority generally to obtain such information from carriers, 47 U.S.C. §§ 403, 217, 218, and the Freedom of Information Act contains an exemption for privileged or confidential commercial and financial information. 5 U.S.C. § 552(b)(4). State commissions would not be required to obtain such data for purposes of computing a national benchmark, so there should be no concern arising out of state laws that do not contain such an exemption.

The Commission could also require service providers to present evidence of their TSLRIC. TSLRIC is a good surrogate for a competitive market price in a particular area, and regulators are increasingly familiar with the data and the computations required to determine a provider's TSLRIC.

EDLINC believes that there would be little point in basing the discount on tariffed rates, for two reasons. First, in many if not most cases, the Commission is likely to exercise its new authority to forebear, so there will be no tariffs on which to base the discount. Second, the Commission does not conduct a quantitative analysis of tariffed rates.

There are two factors that determine affordability: the price of the service, and ability to pay. By basing the discounts on a competitive market price, as discussed above, the Commission and the Joint Board would be going a long way towards ensuring affordability, but there must still be a mechanism for addressing a particular school or library district's ability to pay.

There are two types of geographic areas in which ability to pay is particularly important. First, schools and libraries in low-income areas need assistance because they generally face greater budget constraints than more affluent areas. Although they may have relatively large, dense populations, the individuals that make up those populations cannot afford the tax burden that may be required to meet the expense of providing telecommunications services. Second, rural areas need additional assistance not just because they tend to be high-cost areas, but because they are sparsely populated. Thus, even if the price of a service has been reduced to account for higher costs, there are fewer taxpayers to bear the burden of a particular expense. This means schools and libraries in such areas cannot afford many services without imposing disproportionately large tax burdens.

Therefore, we propose a discount formula to address both of these concerns. We would establish a minimum discount of 30% from the competitive benchmark rate described above, and a maximum discount of 70%. Each school district in a state would be ranked based on a combination of factors, and receive a discount between 30% and 70%, depending on its rank within the state.

Districts would be ranked based on a combination of the lower of the median value of owner-occupied housing and median household income, and population density. Each district would be ranked in each of these categories, from highest to lowest in each state. Then a discount factor would be computed by adding the rank for the lower of the median value of owner-occupied housing and median household income to the rank for population density.¹² The districts would then be ranked again based on their total scores. Then each district would receive a discount percentage proportional to its final ranking, so that the district with the lowest overall score, generally representing the wealthiest district, would receive a discount of 30%, while the school at the bottom of the list would receive a discount of 70%. Schools in between would receive different, intermediate discounts, proportional to their discount factors.

The median value of owner-occupied housing was selected as a factor because it serves as the best indicator of district wealth in non-inner city areas. According to a 1995 study conducted by the National Center for Educational Statistics, it is also the best predictor of per pupil expenditures.

On the other hand, median household income is a better indicator of the relative ability to pay of an inner city area. Thus, choosing the lower of the two provides the best overall indicator of a district's ability to pay.

Finally, population density was selected as a factor because of the lower potential sparsely populated areas have for recovering costs by spreading them out over the population as a whole. We recognize, however, that the current density factor may require adjustment to account for extremely dense urban areas, which may have large proportions of low income populations. Thus, it may be advisable to add an additional factor to adjust for this factor, or to revise the current density factor by giving additional weight to extremely dense areas when establishing the final district rankings.

For those schools and libraries whose lowest competitive bid for a requested service falls above the national benchmark, the discount would be calculated by applying the discount percentage to the national benchmark.

If the lowest competitive bid for a requested service falls below the national benchmark, the discounted price would be calculated by applying the discount percentage to the bid price.

If there were only a single bidder, the discounted price would be calculated by applying the discount rate to the national benchmark price.

If there were no bidders at all, an institution would be eligible to request service from the carrier of last resort. The discounted price would be calculated in the same manner as if there were only one bidder.

If the bid price exceeded the benchmark, the provider would be reimbursed for the difference between the benchmark price and the discounted price. Service providers whose costs exceed the benchmark price would have the right to seek additional compensation from the appropriate state commission. To do so, however, a service provider would be required to justify its economic costs and the regulatory agency would have the authority to verify those costs. If a service provider preferred not to subject itself to the cost justification process, it could do so by accepting the national benchmark as the maximum level for reimbursement.

The foregoing scheme would accomplish several goals. First, competition would be encouraged, because the lowest bidder for a service would receive the right to provide the service. Second, the right to receive cost reimbursement would encourage infrastructure development. Third, schools and libraries in high-cost areas would receive a larger total discount, because bids above the benchmark would be discounted from the benchmark rather than the higher bid price. Fourth, providers will have the right to have their costs reimbursed, but will also have an incentive to bring their costs down to the benchmark, to avoid having to justify their costs. Finally, providers that do not face competition would be discouraged from submitting artificially high bids, because any reimbursement above the benchmark would be subject to cost justification.

17. How should discounts be applied, if at all, for schools and libraries and rural health care providers that are currently receiving special rates?

Answer: As our original joint Comments say on page 19:

The price of special services would follow this general rule: The price paid by a school or library should not exceed the least of (i) the carrier's present-day rate or current bid...[This] general rule ensures that service providers cannot use the benchmark rate as an excuse to raise rates if they are already offering or have negotiated lower rates. For example, many local governments have negotiated cable franchise agreements that require the cable operator to provide free broadband connections to schools, libraries, and government offices for telecommunications purposes. Schools and libraries that are already receiving the benefit of such facilities should not be forced to pay for the service simply because the Commission has established a rate mechanism for those communities that do not already have the capability.

18. What states have established discount programs for telecommunications services provided to schools, libraries, and health care providers? Describe the programs, including the measurable outcomes and the associated costs.

Answer: A number of PUCS, providers and educational agencies have developed specific rules and regulations and agreements concerning telecommunications services to schools. Some of these have been stimulated by state legislative actions and others negotiated with the educational agencies involved. The Florida Public Utilities Commission has analyzed the influence of these actions in the school technology plan, in a May 1996 analysis of the state commissions' actions with respect to education.¹³ The Florida Report found that the state commissions are either authorizing:

• Funding to be committed to infrastructure investment on the Part of the LECS;
• Funding to be directed towards equipment purchases and training by educational entities; or
• Discounted services for use by educational entities.

The state commissions commonly fund infrastructure investment for education via dockets that involve LEC transitions to alternative regulation. The state commissions have also used LEC transitions to alternative regulation as a vehicle to require the provision of funding for equipment purchases by and training for educational entities.

Three examples illustrate some approaches towards defining the standard to be provided under the discounted rates. Maine has adopted voice grade frame relay service (at 56 kbps) as the "standard service" for all public schools and libraries. Michigan, on the other hand, has adopted a standard functionality, rather than a standard service: the ability to transfer data and to access the Internet. Finally, Texas defined the services that qualify for discounts as any telecommunications services used predominantly for distance learning.

Seventeen states now provide educational discounts for at least one of the following categories:

• POTS
• 56 kbps Digital Data Service
• 56 kbps Frame Relay Service
• ISDN-BRI
• DS-1 (1.544 mbps)
• 1.544 mbps Frame Relay Service
• Digital Video Service 1.544 mbps
• DS-3 (45 mbps)
• Digital Video Service 45 mbps
• Video Service

• Alabama, Georgia, Minnesota, and South Carolina: only POTS
• Maine POTS, 56 kbps, and other regulates services, intra state toll usage
• Mississippi: POTS, 56 kbps Digital Data Service, and DS-1
• Tennessee: POTS and ISDN-BRI
• Arkansas: 56 kbps Digital Data Service, DS-1- 1.544 mbps and DS-3 45 mbps
• West Virginia: 56 kbps Frame Relay Service and 1.544 mbps Frame Relays
• Oklahoma: DS-1 1.544 mbps, DS-3 45 mbps, and other regulated services intraLATA long distance services
• Kansas: Digital Video Service 1.54 mbps and Video Service
• Missouri: Digital Video Service l.544 mbps, Digital service 45 mbps and video service
• Illinois, Nebraska, and New Jersey: only Video Service
• Texas and Wisconsin: Other Regulated Services with Texas discounting any communications services used primarily for distance learning purposes and Wisconsin two-way interactive video, high speed data transfer, toll call access to the internet, and direct internet access.
  

19. Should an additional discount be given to schools and libraries located in rural, insular, high- cost and economically disadvantaged areas? What percentage of telecommunications services (e.g., Internet services) used by schools and libraries in such areas are or require toll calls?

Answer: The discount method described in the answer to Question 16 would do much to address the problems of rural, insular, high cost and economically disadvantaged areas. Nevertheless, some districts may find that the formula we propose does not go far enough because of their particular circumstances. Therefore, we propose that each state PUC have the authority to order lower discounts if a district is able to demonstrate that the standard discount calculated under the above-described method does not yield an affordable price. If a school could demonstrate to the PUC that its total telecommunications expenditures exceed 1% of its total expenditures, the school would be entitled to a supplemental discount in addition to the discount computed according to the standard method. The amount of any supplemental discount would be determined by each state PUC.¹⁴ The service provider would be reimbursed for any supplemental discount by both the state and federal universal service mechanisms. The federal universal service mechanism would contribute two-thirds of any supplemental discount, and the state mechanism would be responsible for the remaining one-third.

This supplemental discount could be particularly beneficial to private schools and schools in low income urban areas, which may have relatively low revenues and relatively high costs, making it difficult to find room in a tight budget for new telecommunications services.

20. Should the Commission use some existing model to determine the degree to which a school is disadvantaged (e.g., Title I or the national school lunch program)? Which one? What, if any, modifications should the Commission make to that model?

Answer: Our revised proposal, at Question 16, partially addresses the question of disadvantaged areas by incorporating median household income into the discount calculation. Our revised supplemental discount proposal, at Question 19, suggests that the percentage of revenue devoted to telecommunications should be the basis for any additional discounts. In computing the supplemental discount for districts that are able to demonstrate unusual need, no other existing model is required. Each state commission would establish its own criteria for determining the level of the supplemental discount, once a school or library had shown it met the percentage of revenue test discussed above in Question 19.

21. Should the Commission use a sliding scale approach (i.e., along a continuum of need) or a step approach (e.g., the Lifeline assistance program or the national school lunch program) to allocate any additional consideration given to schools and libraries located in rural, insular, high- cost, and economically disadvantaged areas?

Answer: Our revised proposal essentially adopts a sliding scale approach for discounts, since each district would receive a slightly different discount rate along the scale between 30% and 70%. This mechanism distinguishes among districts to account for their location in rural, high-cost and economically disadvantaged areas. Any additional discounts granted by state PUC's could take the form of graduated reductions, based on the amount by which telecommunications expenditures exceed the 1% threshold, or could take the form of a single sharp reduction to, for instance, a 90% discount for those districts that require it. This is a matter that should probably be left for each state to determine, however.

22. Should separate funding mechanisms be established for schools and libraries and for rural health care providers?

Answer: There is no need for any separate funding mechanism. It should not matter for what purpose contributions are being made towards universal service. The only thing that matters is that the amount contributed is large enough to meet the universal service obligations established by the 1996 Act. Any calculation to determine the total amount required to meet all universal service obligations under the law is independent of exactly what mechanism is used to ensure those obligations are met. In addition, there is no necessary connection between the funding mechanism and expenditures. Section 254(d) states only that telecommunications carriers that provide interstate telecommunications services shall be required to contribute to universal service; nowhere does the statute require multiple mechanisms, or even imply that there should be more than one mechanism.

23. Are the cost estimates contained in the McKinsey Report and NII KickStart Initiative an accurate funding estimate for the discount provisions for schools and libraries, assuming that tariffed rates are used as the base prices?

Answer: We are in the process of examining this question and will provide further information when it is available.

24. Are there other cost estimates available that can serve as the basis for establishing a funding estimate for the discount provisions applicable to schools and libraries and to rural health care providers?

Answer: The McKinsey Report refers to those additional studies: Architecture and Costs of Connecting Schools to the NII (Lee McKnight and Russell Rothstein, MIT Research Program on Communications Policy, 1995; updating and revising Rothstein, U.S. Department of Education White Paper, 1994); Schools in Cyberspace: The Cost of Providing Broadband Services to Public Schools (Telecommunications Industries Analysis Project (TIAP), July 1995); and Technology in America's Public Schools: Getting It In, Getting It Paid For and Getting It Used (Milken Institute for Job and Capital Formation, 1995). We are also attempting to gather information on this point and will provide it when it is available.

25. Are there any specific cost estimates that address the discount funding estimates for eligible private schools?

Answer: We are unaware of any such estimates for eligible private schools, but we are attempting to obtain such information and will provide it to the Joint Board when it is available.

Proxy Models

35. US West has stated that an industry task force "could develop a final model process utilizing consensus model assumptions and input data," US West comments at 10. Comment on USWest's statement, discussing potential legal issues and practical considerations in light of the requirement under the 1996 Act that the Commission take final action in this proceeding within six months of the Joint's Board's recommended decision.

Answer: We question the accuracy of US West's statement. First, we are concerned with any proposal that offers the possibility of any delay in the regulatory process. As the question notes, the Commission and the Joint Board are on a tight time schedule, imposed by law. We believe that the industry has an incentive to delay the process, both to reduce any perceived long-term harm to the industry arising out of the new universal service requirements, and to give it time to develop a regulatory structure that favors the industry's interests.

Second, we question whether any industry task force would address all of the relevant issues. Given that the purpose of the 1996 Act is to promote the growth of a variety of different types of services and service providers, and to advance the interests of schools and libraries, the concerns of all interested parties must be addressed by the Joint Board and the Commission. That is the purpose of the present rulemaking proceeding. If a separate task force were to be established, it would have to include members of the school and library community to ensure representation of all relevant views.

39. Should a proxy model account for the cost of access to advanced telecommunications and information services, as referenced in section 254(b) of the Act? If so, how should this occur?

Answer: The Commission and the Joint Board should ensure that any proxy models it uses are as accurate possible. For this reason, it may be necessary to use separate proxy models for different types of services. We urge the Joint Board not to use a single proxy model to estimate costs for both core services and special services to schools and libraries unless the Joint Board is assured of the accuracy of the model as applied to all the services it purports to address. The Joint Board has ample information regarding the costs of connecting schools and libraries; we believe that this information is sufficient to address the cost of providing those services. A general proxy model for core telephone services, or even for advanced services to residential subscribers, could be very different, much more generalized, and therefore less accurate than the specific information the Joint Board has been provided regarding the cost of serving schools and libraries. These differences might lead to inaccuracies if applied to schools and libraries. Educational institutions are very different types of entities from residential subscribers, and the costs of serving them may well be different. Thus, although it may be possible to link proxy models and ensure that they work together to address all the relevant issues, it is probably necessary, at least until the network for advanced services has been largely built out, to rely on different models for different services.

The NSBA is the nationwide advocacy organization for public school governance. NSBA represents the nation's 95,000 school board members. These board members govern 15,025 local school districts that serve more than 40 million public school students -- approximately 90 percent of all elementary and secondary students in the nation. Virtually all school board members are elected; the remainder are appointed by elected officials. NSBA's mission is to foster excellence and equity in public elementary and secondary education in the United States through local school board leadership. NSBA supports the capacity of each school board -- acting on behalf and in close concert with the people of its community -- to envision the future of education in its community, to establish a structure and environment that allow all students to reach their maximum potential, to provide accountability for the people of its community on performance in the schools, and to serve as the key community advocate for children and youth and their public schools.

The ALA is a nonprofit educational organization of 57,000 librarians, library educators, information specialists, library trustees, and friends of libraries representing public, school, academic, state, and specialized libraries dedicated to the improvement of library and information services. A new five-year initiative, ALA Goal 2000, aims to have ALA and librarianship be as closely associated with the public's right to a free and open information society - intellectual participation - as it is with the idea of intellectual freedom. ALA Goal 2000 also emphasizes the importance of equity on the information superhighway and continues ALA's efforts to advocate for the highest quality of library and information services for all Americans.

The NEA, with over 2.2 million members, is the nation's largest professional employee organization, representing elementary and secondary teachers, higher education faculty, educational support personnel, retired educators, and students preparing to become teachers. NEA is focused on the issues and needs of education and the teaching profession.

The CoSN is a membership organization of institutions formed to further the development of computer-based networking among Kindergarten through 12th grade staff and students throughout the country. CoSN seeks to assure that schools develop sound networking systems and appropriate curricular applications. Our goal is for every classroom in the country to be connected to the Internet by the year 2000. We are working with other groups and policy makers to make sure all schools have affordable access to the NII.
The CCSSO is a nationwide, nonprofit organization comprised of the public officials who head the departments of elementary and secondary education and, in some states, other aspects of education in the state, five U. S. extra-jurisdictions, the District of Columbia, and the Department of Defense Schools. The Council has served as an independent voice on federal education policy since 1927, and has maintained an office in Washington, DC since 1948. Since 1908, chief state school officers have conferred with the U. S. Congress and federal agencies "to consider educational interests common to all states...which furthered by a free comparison of views." In representing the chief education administrators, the Council speaks on behalf of state education agencies, which have the primary authority for education in each state, and carries national influence commensurate with this position. The Council's members develop consensus on major issues, which the Council advocates before the President, federal agencies, the Congress and the public.

ELS is a private San Diego, California firm, with Washington, D.C. offices, that provides information, advocacy and assistance to its clients on a wide range of federal legislative and regulatory matters that affect public elementary and secondary education. It focuses on issues of funding, general, special and vocational education programs; child nutrition, health and safety; immigration and language proficiency; telecommunications and educational technology, among others. ELS's clients are California public school districts exclusively and include the following: Oakland Unified School District; San Diego Unified School District; Sacramento City Unified School District; San Francisco Unified School District; Fresno Unified School District; Centra California Education Legislation Consortium; Long Beach Unified School District; West Contra Costa Unified School District.

NAIS is a voluntary membership organization of over 1,100 member schools and associations in the United States and abroad, and is the national institutional advocate for independent precollegiate education. NAIS represents 416,000 students, 53,200 teachers and instruction support personnel, and 8,600 administrators in the U.S.

Source: Promoting Educational Infrastructure
and the Role of the Florida Public
Service Commission, Bureau of
Research and Policy Analysis,
Division of Research and Regulatory
Review, Florida Public Service
Commission (May 1996).

• U.S. Department of Education, National Center for Education Statistics, Advanced Telecommunications in U.S. Public Elementary and Secondary Schools, 1995, Feb. 1996.

• U.S. Department of Education, National Center for Education Statistics, Fast Response Survey System, "Survey on Advanced Telecommunications in U.S. Private Schools, K-12."

• U.S. Department of Education, National Center for Education Statistics, Advanced Telecommunications in U.S. Public Elementary and Secondary Schools, 1995, Feb. 1996.

• Id.

• PLA/PLDS, Technology in Public Libraries 1995 Survey, Statistical Report 1995 Public Library Data Services (1995).

• Bill Muller, Bristol Public Library, Re: Universal Service Info, bmuller@leo.vsla.edu, March 25, 1996.

• United States General Accounting Office, School Finance: Trends in U.S. Education Spending, GAO/HEHS-95-235 (Sept. 1995).(PDF version of report also avail. from GAO)

• Center for the Study of the States "Public School Finance Programs of the United States and Canada," 1993-94 (1995).

• Economic Policy Institute report "Where Has All the Money Gone?," Richard Rothstein and Karen Hawley Miles (1996).

• Comments of Lincoln Trail Libraries System in CC Docket No. 96-45, April 5, 1996, at p.1.

• Comments of Washington State Library in CC Docket No. 96-45, at p. 17.

• The formula is as follows:
  

  Median Value Median Discount Score = of Owner-Occupied or Household + Population Housing Income Density

• Promoting Educational Infrastructure and the Role of the Florida Public Service Commission, Florida Public Service Commission (May 1996) (the "Florida Report").

• We set the threshold at 1% because the McKinsey Report estimates that schools spend an average of 1.3% of their budgets on all aspects of technology, including telecommunications. See Connecting K-12 Schools in the Information Superhighway, McKinsey & Company, at p. 33. Thus, a school that spends 1% of its budget on telecommunications alone can be presumed to face high telecommunications costs. Libraries spend different proportions of their budgets on telecommunications, so a different threshold may be required for them.