Sec.  54.505   Discounts.

   (a) Discount mechanism. Discounts for eligible schools and libraries shall
   be set as a percentage discount from the pre-discount price.

   (b) Discount percentages. The discounts available to eligible schools and
   libraries shall range from 20 percent to 90 percent of the pre-discount
   price for all eligible services provided by eligible providers, as defined
   in this subpart. The discounts available to a particular school, library, or
   consortium of only such entities shall be determined by indicators of
   poverty and high cost.

   (1) For schools and school districts, the level of poverty shall be measured
   by the percentage of their student enrollment that is eligible for a free or
   reduced price lunch under the national school lunch program or a
   federally-approved alternative mechanism. School districts applying for
   eligible services on behalf of their individual schools may calculate the
   district-wide percentage of eligible students using a weighted average. For
   example, a school district would divide the total number of students in the
   district eligible for the national school lunch program by the total number
   of students in the district to compute the district-wide percentage of
   eligible students. Alternatively, the district could apply on behalf of
   individual schools and use the respective percentage discounts for which the
   individual schools are eligible.

   (2) For libraries and library consortia, the level of poverty shall be based
   on the percentage of the student enrollment that is eligible for a free or
   reduced price lunch under the national school lunch program or a
   federally-approved alternative mechanism in the public school district in
   which they are located. If the library is not in a school district then its
   level of poverty shall be based on an average of the percentage of students
   eligible for the national school lunch program in each of the school
   districts that children living in the library's location attend. Library
   systems applying for discounted services on behalf of their individual
   branches shall calculate the system-wide percentage of eligible families
   using an unweighted average based on the percentage of the student
   enrollment that is eligible for a free or reduced price lunch under the
   national school lunch program in the public school district in which they
   are located for each of their branches or facilities.

   (3) The Administrator shall classify schools and libraries as “urban” or
   “rural” based on location in an urban or rural area, according to the
   following desigantions.

   (i) Schools and libraries located in metropolitan counties, as measured by
   the Office of Management and Budget's Metropolitan Statistical Area method,
   shall be designated as urban, except for those schools and libraries located
   within metropolitan counties identified by census block or tract in the
   Goldsmith Modification.

   (ii) Schools and libraries located in non-metropolitan counties, as measured
   by the Office of Management and Budget's Metropolitan Statistical Area
   method, shall be designated as rural. Schools and libraries located in rural
   areas within metropolitan counties identified by census block or tract in
   the Goldsmith Modification shall also be designated as rural.

   (4) School districts, library systems, or other billed entities shall
   calculate discounts on supported services described in  Sec. 54.502 or other
   supported special services described in  Sec. 54.503 that are shared by two or
   more of their schools, libraries, or consortia members by calculating an
   average based on the applicable discounts of all member schools and
   libraries. School districts, library systems, or other billed entities shall
   ensure that, for each year in which an eligible school or library is
   included for purposes of calculating the aggregate discount rate, that
   eligible school or library shall receive a proportionate share of the shared
   services for which support is sought. For schools, the average discount
   shall be a weighted average of the applicable discount of all schools
   sharing a portion of the shared services, with the weighting based on the
   number of students in each school. For libraries, the average discount shall
   be a simple average of the applicable discounts to which the libraries
   sharing a portion of the shared services are entitled.

   (c) Matrix. The Administrator shall use the following matrix to set a
   discount rate to be applied to eligible interstate services purchased by
   eligible schools, school districts, libraries, or library consortia based on
   the institution's level of poverty and location in an “urban” or “rural”
   area.


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                   Schools and Libraries discount matrix
        Discount level
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                            How disadvantaged?
---------------------------------------------------------------------------   U
rban discount     Rural discount
         % of students eligible for national school lunch program
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<1.....................................................................
         20                 25
1-19......................................................................
            40                 50
20-34.....................................................................
            50                 60
35-49.....................................................................
            60                 70
50-74.....................................................................
            80                 80
75-100....................................................................
            90                 90
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   (d) [Reserved]

   (e) Interstate and intrastate services. Federal universal service support
   for schools and libraries shall be provided for both interstate and
   intrastate services.

   (1) Federal universal service support under this subpart for eligible
   schools and libraries in a state is contingent upon the establishment of
   intrastate discounts no less than the discounts applicable for interstate
   services.

   (2) A state may, however, secure a temporary waiver of this latter
   requirement based on unusually compelling conditions.

   (f) State support. Federal universal service discounts shall be based on the
   price of a service prior to the application of any state provided support
   for schools or libraries.

   [ 62 FR 32948 , June 17, 1997, as amended at  62 FR 41304 , Aug. 1, 1997;  63 FR 2130 , Jan. 13, 1998;  63 FR 70572 , Dec. 21, 1998]