§ 54.507   Cap.

   (a) Amount of the annual cap. The aggregate annual cap on federal
   universal service support for schools and libraries shall be $3.9
   billion per funding year, of which $1 billion per funding year will be
   available for category two services, as described in § 54.502(a)(2),
   unless demand for category one services is higher than available
   funding.

   (1) Inflation increase. In funding year 2016 and subsequent funding
   years, the $3.9 billion funding cap on federal universal service
   support for schools and libraries shall be automatically increased
   annually to take into account increases in the rate of inflation as
   calculated in paragraph (a)(2) of this section.

   (2) Increase calculation. To measure increases in the rate of inflation
   for the purposes of this paragraph (a), the Commission shall use the
   Gross Domestic Product Chain-type Price Index (GDP-CPI). To compute the
   annual increase as required by this paragraph (a), the percentage
   increase in the GDP-CPI from the previous year will be used. For
   instance, the annual increase in the GDP-CPI from 2008 to 2009 would be
   used for the 2010 funding year. The increase shall be rounded to the
   nearest 0.1 percent by rounding 0.05 percent and above to the next
   higher 0.1 percent and otherwise rounding to the next lower 0.1
   percent. This percentage increase shall be added to the amount of the
   annual funding cap from the previous funding year. If the yearly
   average GDP-CPI decreases or stays the same, the annual funding cap
   shall remain the same as the previous year.

   (3) Public notice. When the calculation of the yearly average GDP-CPI
   is determined, the Wireline Competition Bureau shall publish a public
   notice in the Federal Register within 60 days announcing any increase
   of the annual funding cap including any increase to the $1 billion
   funding level available for category two services based on the rate of
   inflation.

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

   (5) Amount of unused funds. All funds collected that are unused shall
   be carried forward into subsequent funding years for use in the schools
   and libraries support mechanism in accordance with the public interest
   and notwithstanding the annual cap. The Chief, Wireline Competition
   Bureau, is delegated authority to determine the proportion of unused
   funds, if any, needed to meet category one demand, and to direct the
   Administrator to use any remaining funds to provide support for
   category two requests. The Administrator shall report to the
   Commission, on a quarterly basis, funding that is unused from prior
   years of the schools and libraries support mechanism.

   (6) Application of unused funds. On an annual basis, in the second
   quarter of each calendar year, all funds that are collected and that
   are unused from prior years shall be available for use in the next full
   funding year of the schools and libraries mechanism in accordance with
   the public interest and notwithstanding the annual cap as described in
   this paragraph (a).

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

   (c) Requests. The Administrator shall implement an initial filing
   period that treats all schools and libraries filing an application
   within that period as if their applications were simultaneously
   received. The initial filing period shall begin and conclude on dates
   to be determined by the Administrator with the approval of the Chief of
   the Wireline Competition Bureau. The Administrator shall maintain on
   the Administrator's Web site a running tally of the funds already
   committed for the existing funding year. The Administrator may
   implement such additional filing periods as it deems necessary.

   (d) Annual filing requirement. (1) Schools and libraries, and consortia
   of such eligible entities shall file new funding requests for each
   funding year no sooner than the July 1 prior to the start of that
   funding year. Schools, libraries, and eligible consortia must use
   recurring services for which discounts have been committed by the
   Administrator within the funding year for which the discounts were
   sought.

   (2) Installation of category one non-recurring services may begin on
   January 1 prior to the July 1 start of the funding year, provided the
   following conditions are met:

   (i) Construction begins after selection of the service provider
   pursuant to a posted FCC Form 470,

   (ii) A category one recurring service must depend on the installation
   of the infrastructure, and

   (iii) The actual service start date for that recurring service is on or
   after the start of the funding year (July 1).

   (3) Installation of category two non-recurring services may begin on
   April 1 prior to the July 1 start of the funding year.

   (4) The deadline for implementation of all non-recurring services will
   be September 30 following the close of the funding year. An applicant
   may request and receive from the Administrator an extension of the
   implementation deadline for non-recurring services if it satisfies one
   of the following criteria:

   (i) The applicant's funding commitment decision letter is issued by the
   Administrator on or after March 1 of the funding year for which
   discounts are authorized;

   (ii) The applicant receives a service provider change authorization or
   service substitution authorization from the Administrator on or after
   March 1 of the funding year for which discounts are authorized;

   (iii) The applicant's service provider is unable to complete
   implementation for reasons beyond the service provider's control; or

   (iv) The applicant's service provider is unwilling to complete
   installation because funding disbursements are delayed while the
   Administrator investigates the application for program compliance.

   (e) Long term contracts. If schools and libraries enter into long term
   contracts for eligible services, the Administrator shall only commit
   funds to cover the pro rata portion of such a long term contract
   scheduled to be delivered during the funding year for which universal
   service support is sought.

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

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

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

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

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

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

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