Request for Review of the Decision of the Universal Service Administrator by Winston-Salem/Forsyth County School District and IBM

AGENCY:

Federal Communications Commission.

ACTION:

Notice.

SUMMARY:

In this document, the Commission grants the Requests for Review by Winston-Salem/Forsyth County School District, Winston-Salem, North Carolina and International Business Machines, Inc., and remands the Requests for Review to SLD for consideration.

DATES:

The Commission's decisions on the Requests for Review addressed in this order were effective December 8, 2003.

FOR FURTHER INFORMATION CONTACT:

Andy Firth, Attorney, Telecommunications Access Policy Division, Wireline Competition Bureau, (202) 418-7400, TTY (202) 418-0484.

SUPPLEMENTARY INFORMATION:

This is a summary of the Commission's Order in CC Docket Nos. 96-45 and 97-21 released on December 8, 2003. The full text of this document is available for public inspection during regular business hours in the FCC Reference Center, Room CY-A257, 445 Twelfth Street, SW., Washington, DC 20554.

I. Introduction

1. In this Order, before the Commission are Requests for Review by Winston-Salem/Forsyth County School District, Winston-Salem, North Carolina (Winston-Salem), and International Business Machines, Inc. (IBM). This school and IBM seek review of decisions of the Schools and Libraries Division (SLD) of the Universal Service Administrative Company (Administrator) that denied Winston-Salem $16.7 million in discounts for internal connections from the universal service support mechanisms for schools and libraries for Funding Year 2002. For the reasons set forth below, we grant these Requests for Review, and remand to SLD for consideration in accordance with this Order.

2. The Commission also releases the Ysleta Order, December 8, 2003, which addresses request for review by other applicants that also selected IBM as their service provider. In the Ysleta Order, the Commission finds that a number of schools in Funding Year 2002 engaged in various practices that violated one or more of our rules regarding competitive bidding, the weighting of price in selecting among bidders, and the submission of bona fide requests for services under this support mechanism. The Commission also concluded, however, that the circumstances of those applicants justified a waiver of our rules governing the Funding Year 2002 filing window, and allowed those applicants to re-bid for their requested services. As set forth below, we conclude that the facts presented in this case, unlike the cases that the Commission addresses in the Ysleta Order, do not support a denial of Winston-Salem's request for discounts under the program.

II. Discussion

3. We conclude, based on the record before us that SLD erred in denying the discounts requested by Winston-Salem. The grounds upon which we found rule violations in the Ysleta case are not present here.

4. First, we cannot conclude that Winston-Salem violated our competitive bidding rules. Unlike the Ysleta Order, Winston-Salem did not issue any sort of RFP for a systems integrator prior to filing its FCC Form 471. It merely posted a request for bids for eligible services on FCC Form 470. While we are troubled that it utilized an overly broad FCC Form 470, that is not, in itself, a basis for denying its requests for discounts. In the Ysleta Order, we clarified that the requirement for a bona fide request for services means that applicants must submit a list of specified services for which they anticipate they are likely to seek discounts, consistent with their technology plans; they may not list every service and product eligible for discounts under the schools and libraries support mechanism. At the same time, we recognized that past practices arguably could be construed as permitting broad FCC Form 470, and therefore clarified this requirement prospectively.

5. Second, we cannot conclude that Winston-Salem failed to properly consider price when selecting its service provider because only one party responded to its posted FCC Form 470. Its decision to enter into a contract with the one bidder is no different than the thousands of other applicants who receive either no bids, or only one bid, in response to a FCC Form 470 posting. Our rules require applicants to seek competitive bids; they do not require an applicant to have competing bidders where none appear. While we find it unusual, given the size of Winston-Salem's proposed project, that no other entity submitted a bid, this alone, without more, cannot be the basis for denying Winston-Salem's request for review. We note, however, that this case demonstrates how an overly broad FCC Form 470 posting may well stifle competition among service providers. In the Ysleta Order, we clarify that prospectively such a broad FCC Form 470 is not consistent with our rules.

6. Finally, we note that in its Request for Review, Winston-Salem describes in detail the process it employed to select a Systems Integrator, to demonstrate that Winston-Salem is committed to utilizing a fully competitive selection process for the award of its contracts. We find that Winston-Salem's procedures for selecting Eperitus as a Systems Integrator are not relevant to our decision here, because it did not seek discounts on any services provided by Eperitus, and the services provided by Eperitus were outside the scope of the E-rate program.

7. Therefore, we grant the above-captioned Requests for Review and remand the Winston-Salem application to SLD. In doing so, we emphasize that we make no determination as to whether the applicant is ultimately entitled to any funding, as SLD must scrutinize all applications for ineligible services and compliance with all program rules, including all prospective clarifications enunciated in the Ysleta Order.

III. Ordering Clause

8. Pursuant to § 54.722(a) of the Commission's rules, that the above-captioned Requests for Review are granted to the extent provided herein and remanded to SLD for further processing in accordance with this Order.