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 Federal  Communications  Commission  DA  05-  2834 
 Before  the  Federal  Communications  Commission 
 Washington,  DC  20554 
 In  the  Matter  of  )  ) 
 Request  for  Review  of  the  )  Decision  of  the  ) 
 Universal  Service  Administrator  by  )  ) 
 Houston  Independent  School  District  )  File  No.  SLD-  398831  Houston,  Texas  ) 
 )  Schools  and  Libraries  Universal  Service  )  CC  Docket  No.  02-  6 
 Support  Mechanism  ) 


 ORDER 
 Adopted:  October  27,  2005  Released:  October  27,  2005 
 By  the  Telecommunications  Access  Policy  Division,  Wireline  Competition  Bureau: 
 1.  In  this  Order,  the  Telecommunications  Access  Policy  Division  grants  a  Request  for  Review  filed  by  Houston  Independent  School  District  (Houston)  seeking  review  of  a  decision  by  the 
 Schools  and  Libraries  Division  of  the  Universal  Service  Administrative  Company  (USAC).  1  As  explained  below,  we  find  that  USAC  erred  in  denying  Houston’s  Funding  Year  2004  application  for 
 discounted  services  under  the  schools  and  libraries  universal  service  support  mechanism  on  the  ground  that  Houston’s  funding  request  was  for  services  ineligible  for  discounts  under  program  rules.  Based  upon 
 our  review  of  the  record,  we  find  that  Houston’s  funding  request  was  for  services  eligible  for  support  under  the  schools  and  libraries  universal  service  support  mechanism.  Accordingly,  for  the  reasons  set 
 forth  below,  we  grant  the  Request  for  Review  and  remand  Houston’s  application  to  USAC  for  further  consideration  consistent  with  this  Order. 


 2.  Under  the  schools  and  libraries  universal  service  support  mechanism,  commonly  referred  to  as  the  E-  rate  program,  eligible  schools,  libraries,  and  consortia  that  include  eligible  schools  and 
 libraries,  may  apply  for  discounts  for  eligible  telecommunications  services,  Internet  access,  and  internal  connections.  2  The  Commission  vested  in  USAC  the  responsibility  for  administering  the  application  process 
 for  the  universal  service  support  mechanism.  3  Accordingly,  USAC  reviews  the  applications  for  discounts 


 1  Letter  from  Schools  and  Libraries  Division,  Universal  Service  Administrative  Company,  to  William  Edwards, 
 Houston  Independent  School  District,  dated  January  18,  2005  (Administrator’s  Decision  on  Appeal);  Letter  from  William  Edwards,  Houston  Independent  School  District,  to  Federal  Communications  Commission,  filed  March  18, 


 2005  (Request  for  Review).  Section  54.  719(  c)  of  the  Commission’s  rules  provides  that  any  person  aggrieved  by  an  action  taken  by  a  division  of  the  Universal  Service  Administrative  Company  may  seek  review  from  the  Commission. 
 47  C.  F.  R.  §  54.  719(  c). 
 2  47  C.  F.  R.  §§  54.  502,  54.  503. 


 3  47  C.  F.  R.  §  54.  705(  a)(  1).  The  Schools  and  Libraries  Committee  oversees  the  administration  of  the  schools  and 
 libraries  support  mechanism.  Id.  See  also  Changes  to  the  Board  of  Directors  of  the  National  Exchange  Carrier  Association,  Inc.,  Federal  State  Joint  Board  on  Universal  Service,  Third  Report  and  Order  and  Fourth  Order  on 
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 that  it  receives,  and  issues  funding  commitments  in  accordance  with  the  Commission’s  rules.  Under  the  schools  and  libraries  universal  service  support  mechanism,  applicants  may  only  seek  support  for  eligible 
 services.  4  Pursuant  to  the  Administrator’s  operating  procedures,  USAC  performs  a  Program  Integrity  Assurance  (PIA)  review  to  verify  that  the  discounts  recipients  seek  are  for  eligible  services,  provided  to 
 eligible  entities,  and  for  eligible  uses.  5 
 3.  In  its  Funding  Year  2004  application,  Houston  sought  discounts  for  the  provision  of  Internet  access  over  a  fiber  optic  wide  area  network  (WAN)  operated  and  managed  by  Phonoscope,  LTD 


 (Phonoscope).  6  Houston’s  Funding  Year  2004  application,  filed  on  February  3,  2004,  was  an  extension  of  applications  USAC  had  previously  approved  for  Funding  Years  2002  and  2003.  7  The  record  shows  that 
 the  fiber  optic  WAN  is  part  of  Phonoscope’s  integrated,  facilities-  based  Metropolitan  Area  Network  spanning  five  counties  in  the  Houston  area.  8  The  amount  of  funding  requested  in  Houston’s  application 
 was  $4,422,810.08.  9  On  June  30,  2004,  USAC  denied  funding  for  the  entire  application  on  the  basis  that  thirty  percent  or  more  of  the  funding  request  was  for  dark  fiber  and  a  private  network,  which  are 
 ineligible  under  program  rules.  10  On  July  22,  2004,  Houston  filed  an  appeal  with  USAC,  asserting  that  USAC  misconstrued  its  funding  request  and  that,  in  actuality,  the  funds  were  requested  for  a  managed 
 “lit”  fiber  connection  serving  Houston  area  schools.  11  Houston  further  explained  that  Phonoscope  has 
 Reconsideration  in  CC  Docket  No.  97-  21  and  Eighth  Order  on  Reconsideration  in  CC  Docket  No.  96-  45,  13  FCC  Rcd  25058,  25075-  76,  paras.  30-  31  and  34  (1998)  (Eighth  Reconsideration  Order)  (describing  the  functions  of  the 
 Schools  and  Libraries  Committee).  Under  the  rules  adopted  in  the  Commission’s  Eighth  Reconsideration  Order,  the  Schools  and  Libraries  Committee’s  functions  include,  but  are  not  limited  to,  “development  of  applications  and 
 associated  instructions,”  and  “administration  of  the  application  process,  including  activities  to  ensure  compliance  with  Federal  Communications  Commission  rules  and  regulations.” 


 4  See  47  C.  F.  R.  §  54.  504;  Instructions  for  Completing  the  Schools  and  Libraries  Universal  Service,  Services  Ordered 
 and  Certification  Form,  OMB  3060-  0806,  at  20  (October  2003)  (FCC  Form  471  Instructions)  (stating  that  applicants  may  not  seek  support  for  ineligible  services,  entities  and  uses).  See  also  USAC  website, 


 <http://  www.  sl.  universalservice.  org/  data/  pdf/  i471y7.  pdf>. 
 5  See  USAC  website,  PIA,  <http://  www.  sl.  universalservice.  org/  reference/  6pia.  asp>. 


 6  See  FCC  Form  471,  Houston  Independent  School  District,  filed  February  3,  2004  (Houston  FCC  Form  471).  The 
 Funding  Request  Numbers  (FRNs)  at  issue  in  this  case  are:  1135973,  1136206,  1136285,  1136449,  1136548,  and  1136899. 


 7  See  Request  for  Review  at  2. 
 8  See  Letter  from  Rhonda  Druke,  Phonoscope,  LTD,  to  Schools  and  Libraries  Division,  Universal  Service 
 Administrative  Company,  dated  July  8,  2004. 
 9  Id. 


 10  Letter  from  Schools  and  Libraries  Division,  Universal  Service  Administrative  Company,  to  William  Edwards, 
 Houston  Independent  School  District,  dated  June  30,  2004,  at  5-  6  (Funding  Commitment  Decision  Letter).  Dark  fiber  refers  to  fiber  optic  cable  for  which  the  service  provider  has  not  provided  modulating  equipment,  i.  e.,  the  fiber 


 is  “unlit.”  See  2003  Eligible  Services  List,  <http://  www.  sl.  universalservice.  org/  data/  pdf/  EligibleServicesList  (dated  October  10,  2003)  (2003  Eligible  Services  List). 


 11  Letter  from  William  Edwards,  Houston  Independent  School  District,  to  Schools  and  Libraries  Division,  Universal 
 Service  Administrative  Company,  dated  July  22,  2004.  On  August  6,  2004,  Houston  amended  its  appeal  by  correcting  the  referenced  Funding  Applications  Number.  Letter  from  Jacqueline  Martin,  Houston  Independent 


 School  District,  to  Schools  and  Libraries  Division,  Universal  Service  Administrative  Company,  dated  August  6,  2004.  It  appears  from  the  record  that  USAC  considered  the  appeal  filed  on  August  6.  See  Administrator’s  Decision 
 on  Appeal. 
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 managed  the  inner  workings  of  the  WAN  using  its  own  fiber,  switches,  and  modulating  equipment  since  Funding  Year  2001.  12  On  January  18,  2005,  USAC  denied  the  appeal,  reiterating  its  earlier  finding  that 
 Houston’s  application  requested  support  for  the  installation  and  management  of  dark  fiber  and  a  private  network,  which  are  ineligible  for  discounts.  13  On  March  18,  2005,  Houston  filed  the  instant  Request  for 
 Review.  14 
 4.  In  its  Request  for  Review,  Houston  argues  that  USAC  inaccurately  described  its  Funding  Year  2004  application  as  a  request  for  support  for  dark  fiber  and  a  private  network.  15  Houston  asserts  that 


 its  funding  request  is  related  to  the  provision  of  telecommunications,  or  more  specifically,  Internet  access  over  “lit”  fiber  and  is  not  part  of  a  private  network.  16  As  evidence  of  these  assertions,  Houston  provides 
 vendor  quotes  (from  Phonoscope)  for  each  FRN  illustrating  that  Phonoscope  is  providing  one  “Gig  Managed  Ethernet  Circuit”  to  each  of  Houston’s  sites  over  a  Phonoscope-  owned  fiber  optic  network 
 infrastructure.  17  Houston  argues  that  use  of  the  terms  “Gig  Managed  Ethernet  Circuit”  and  “provisioned”  in  the  vendor  quotes  relate  to  active,  not  dark,  fiber.  18 


 5.  Houston  also  argues  that  attaching  Phonoscope  equipment  necessary  to  transmit  signals  over  the  fiber  facility  demonstrates  that  its  funding  request  is  for  “lit”  fiber  instead  of  unsupported  dark 
 fiber.  Houston  explains  that  Phonoscope  uses  Gigabit  Interface  Connectors  (GBICs),  which  are  essential  modulating  devices  for  Gigabit  Ethernet  systems,  to  manage  its  fiber  network  and  deliver  signals  for 
 Houston  area  schools.  19  The  GBICs  are  maintained  at  each  Houston  site  as  an  uplink  to  the  Phonoscope  network.  20  The  Phonoscope  uplink  GBIC  at  each  site  is  the  first  inline  piece  of  equipment  for  the  final 
 hand-  off  link  between  the  provider  and  Houston.  21  According  to  Houston,  the  fiber  providing  Internet  connectivity  to  each  site  is  useless  without  the  Phonoscope  GBICs;  Houston  may  not  obtain 
 telecommunications  services  if  it  attempts  to  bypass  the  provider’s  GBICs  and  connect  its  local  area  network  equipment  directly  to  the  uplink  fiber.  22  Houston  states  that  the  GBICs  in  Houston’s  local 


 12  Id. 
 13  Administrator’s  Decision  on  Appeal  at  1. 
 14  See  Request  for  Review  at  4. 
 15  Id.  at  2. 
 16  Id. 
 17  See  Id.  at  4,  Attachment  3.  Houston  provided  these  vendor  quotes  in  response  to  a  PIA  request  for  additional 
 information.  See  Letter  from  Schools  and  Libraries  Division,  Universal  Service  Administrative  Company,  to  Jacqueline  Martin,  Houston  Independent  School  District,  dated  May  19,  2004.  A  quote  for  FRN  1135973,  for 


 example,  states  that  “Phonoscope  is  pleased  to  provide  you  with  this  clarification  quote  for  the  annual  management  of  a  three  Gig  Managed  Ethernet  Circuit  to  each  of  the  11  HISD  [Houston]  hub  sites  listed  below  provisioned  over  a 
 Phonoscope  owned  fiber  optic  network  infrastructure.”  See  Letter  from  David  Caddle,  Phonoscope,  LTD  to  Jim  Leichty,  Houston  Independent  School  District,  dated  January  16,  2004. 


 18  See  id. 
 19  In  its  Request  for  Review,  Houston  states  that  it  is  unclear  whether  USAC  is  basing  its  determination  on 
 Phonoscope’s  use  of  Gigabit  Interface  Connectors,  which  are  also  used  by  lessors  of  dark  fiber.  See  Request  for  Review  at  5-  6. 


 20  See  Request  for  Review  at  6. 
 21  Id. 
 22  Id. 
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 switches  exist  solely  to  accept  the  “lit”  fiber  hand-  off  from  Phonoscope.  23  Thus,  Houston  argues  that  the  managed  fiber  network  provided  by  Phonoscope  is  not  dark  fiber.  24 
 6.  We  have  reviewed  the  underlying  record  and  conclude  that  USAC  erred  in  denying  Houston’s  request  for  support.  As  discussed  above,  USAC  determined  that  Houston’s  funding  request 
 was  for  dark  fiber  and  a  private  network,  both  of  which  are  ineligible  under  program  rules.  It  appears  that  USAC’s  determination  was  based  on  language  contained  in  the  Houston-  Phonoscope  service  agreement.  25 
 Our  review  of  the  entire  Phonoscope  Agreement,  related  addendums  and  other  supporting  documentation  indicates  that  the  Internet  fiber  optic  WAN  at  issue  is  indeed  “lit”  and  is  not  a  private  network.  The 
 record  demonstrates  that  the  Internet  fiber  optic  network  at  issue  is  not  a  private  network  because  it  is  provided  over  a  common  carrier  Metropolitan  backbone.  26  In  fact,  Houston’s  WAN  is  provided,  in  part, 
 utilizing  Phonoscope  fiber  routes  that  service  other  customers.  27 
 7.  Program  rules  permit  schools  and  libraries  to  receive  support  to  obtain  telecommunications  services  and  Internet  access  using  lit  fiber.  28  To  receive  support  for  services  using  lit 


 fiber  as  a  Priority  One  service,  the  school  or  library  must  purchase  a  functioning  service  from  either  a  telecommunications  service  provider  or  Internet  access  provider,  which  in  turn  is  responsible  for  ensuring 
 that  both  the  fiber  and  the  equipment  to  light  the  fiber  are  provided.  29  The  record  in  the  instant  case  indicates  that  Houston  is  buying  a  service  that  includes  Phonoscope  equipment  necessary  to  transmit 
 signals  over  fiber  facilities  instead  of  using  its  own  equipment  to  effectively  “light”  the  fiber.  In  fact,  since  Funding  Year  2001,  Phonoscope  has  provided,  operated,  and  managed  Gigabit  Ethernet  Circuits  for 
 each  of  Houston’s  sites  over  a  Phonoscope-  owned  fiber  optic  network  infrastructure.  Telecommunications  services,  as  well  as  Internet  connectivity,  would  not  be  possible  for  the  Houston  area 
 schools  at  issue  without  the  Phonoscope  modulating  equipment.  30  Thus,  we  find  that  the  fiber  optic  WAN 
 23  Id. 
 24  Id. 
 25  See  Fiber  Optic  Network  Lease  Agreement  of  District  Wide  Area  Fiber  Optic  Network  for  Houston  Independent 
 School  District,  RFP  #  00-  11-  6  (2000)  (Phonoscope  Agreement).  Section  VI  of  the  Phonoscope  Agreement  provides,  in  pertinent  part: 


 Use:  The  [Houston  Independent  School]  District  agrees  that  only  District’s  own  signals  will  be  carried  over  the  Dark  Fiber  specified  in  this  Agreement,  and 
 specifically  agrees  not  to  resell  the  use  of  the  Dark  Fiber  for  the  purposes  of  transmitting  a  third  Party’s  signal.  The  District  shall  not  extend  the  Applicable 
 Fiber  in  any  manner  nor  shall  the  District  access  or  allow  any  third  party  to  access,  any  of  Phonoscope’s  splice  points. 


 Id.  at  9. 
 26  See  Letter  from  Rhonda  Druke,  Phonoscope,  LTD,  to  Schools  and  Libraries  Division,  Universal  Service 
 Administrative  Company,  dated  July  8,  2004. 
 27  Id. 


 28  See  2003  Eligible  Services  List.  See  also  In  the  Matter  of  Schools  and  Libraries  Universal  Service  Support 
 Mechanism,  CC  Docket  No.  02-  6,  Third  Report  and  Order  and  Second  Further  Notice  of  Proposed  Rulemaking,  18  FCC  Rcd  26912,  26934,  para.  76  (2003)  (Third  Report  and  Order). 


 29  See  Third  Report  and  Order,  18  FCC  Rcd  at  26934,  para.  76. 
 30  See  Request  for  Review  at  6. 
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 provided  by  Phonoscope  is  “lit”  and  is  therefore  eligible  for  E-  rate  support.  As  a  result,  we  grant  Houston’s  Request  for  Review. 
 8.  ACCORDINGLY,  IT  IS  ORDERED,  pursuant  to  authority  delegated  under  sections  0.91,  0.291  and  54.  722(  a)  of  the  Commission’s  rules,  47  C.  F.  R.  §§  0.  91,  0.291  and  54.  722(  a),  that  the  Request 
 for  Review  filed  by  Houston  Independent  School  District,  Houston,  Texas,  on  March  18,  2005,  IS  GRANTED  and  REMANDED  to  USAC  for  further  action  consistent  with  this  decision. 


 FEDERAL  COMMUNICATIONS  COMMISSION 
 Narda  M.  Jones  Chief 
 Telecommunications  Access  Policy  Division  Wireline  Competition  Bureau 
5