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Eligible Services Framework

Only certain products and services products and services, used in certain ways, are eligible for E-rate funds. Eligibility is based on criteria established by statute and Federal Communications Commission (FCC) rules.

This document provides an overview of product and service eligibility, and includes references to other documents that provide additional details.

The high points of product and service eligibility consist of these points:

  • How a product or service is used can affect whether or not the product or service is eligible
  • Each of four separate categories of service has its own rules for eligibility
  • Details about funding priorities, competitive bidding, and Internal Connections eligibility should also be understood.
  • The Eligible Services List and other information contain further information to guide applicants and service providers.

The Conditional Nature of Eligibility

Eligibility for E-rate discounts requires not only that the product or service is eligible, but that it is put to an eligible use, and that it is utilized by an eligible school or library entity at an eligible location.

The Eligible Services List is one of the key documents that indicate the products and services can receive funding, and the acceptable uses for those products and services. For example, the Eligible Services List indicates that some types of software—such as software for a network operating system—can be eligible for funding, while other software—for example, application software such as word processing—is not eligible. The List indicates that cable for connecting classrooms into a network can be eligible, but cable for electrical wiring is not eligible.

An entry in the List does not indicate that a product or service is eligible so much as it indicates the conditions under which a product or service is eligible. The Eligible Services List, and other documents available on the SLD website, provide important details so that the conditions for E-rate eligibility can be understood.

The Four Categories of Services

FCC rules indicate that funds will be available for four categories of service: Telecommunications Services, Internet Access, Internal Connections and Basic Maintenance of Internal Connections.

First Priority for Funding
Telecommunications Services:

These are services that are used to communicate information electronically between sites. The services must be provided by a Telecommunications Carrier, that is, an organization recognized by the FCC as providing telecommunications services on a common carriage basis. Examples of Telecommunications Services include basic telephone service and digital transmission services such as T-1 lines.

Internet Access:

"Basic conduit access" to the Internet, including e-mail, is eligible for discount, and can be provided by an eligible Telecommunications Carrier or any commercial organization.

Second Priority for Funding

Internal Connections:

Internal Connections consist of the wiring and components that expand data access within a school or library, such as to individual classrooms within a school. Internal Connections can be provided by any commercial organization.

Basic Maintenance:

Basic Maintenance of Internal Connections consists of services “necessary to enable the continued operation of the eligible equipment.” It includes: repair and upkeep of eligible hardware, wire and cable maintenance, basic technical support, and configuration changes.

In addition, the FCC has determined that a voice mail service can receive discounts in the Telecommunications or Internet Access category and that voice mail products can receive discounts as Internal Connections.

Further Details:

Under FCC rules, requests for Telecommunications Services and Internet Access (Priority 1 services) are funded first, and remaining funds are then applied to approved requests for Internal Connections (Priority 2 services). Because of this prioritization, not all requests for Priority 2 services will necessarily receive funding—funding in these categories begins with the most economically disadvantaged schools and libraries based on criteria established by the FCC. (See the document Discount Matrix for additional information on this topic.)

Successful funding requires a competitive bidding process that is initiated using FCC Form 470. Once the most cost-effective bid has been selected, the actual requests for funds are submitted using FCC Form 471 during a specific filing window that includes December and January of each year. The Form 471 application can consist of one or more individual funding requests. Each funding request indicates the products and services requested, the cost of those products and services, and the service provider who has been selected as most cost effective.

More about Internal Connections. Internal Connections is the only program category that allows for the purchase of components by the applicant. The FCC has provided the following guidance regarding the distinguishing factors between eligible and ineligible components:

  • Components are eligible only if they are necessary to transport information all the way to individual classrooms or public areas of a library. That is, the service is an essential element in the transmission of information within the school or library.
  • Support is provided for such items as routers, hubs, some types of network file servers, and wireless LANs, and their installation and basic maintenance. Eligible components are intended to serve as a conduit for the transmission of information. For example, file servers may not be used principally to supplement storage requirements of personal computers on a network, but may be used to facilitate Internet access by maintaining a database of Internet addresses (i.e., serve as a Domain Name Service). (Refer to the Eligible Services List for additional information.)
  • Support is not provided for equipment that is not needed to transport information to individual classrooms. Examples include personal computers in the classroom, fax machines, modems in personal computers, and asbestos removal.
  • The purchase or building of a Wide Area Network is not supported as Internal Connections. However, the leasing of services that provide Wide Area Network capability may be eligible under the other program categories— Telecommunications Services or Internet Access.

Additional Reference Information

As indicated earlier, the Eligible Services List provides additional specificity about products and services that may receive E-rate discounts. Further documents on the SLD website provide guidance in particular areas.

The Eligible Products Database provides even greater detail than the Eligible Services List for some specific makes and models of Internal Connections products that manufacturers indicate are eligible for E-rate funding.

Item 21 Attachment. The document that is submitted to the SLD with the details of the products and services for which discounts are requested is known as the “Item 21 Attachment.” A clear description of the products and services desired can be a key factor in an efficient SLD review of funding requests. For additional information and examples, go to Item 21 Attachments for Form 471.

Cost Allocation. Some products and services include components or features that are not eligible, but also include components or features that are eligible. Funding for the eligible portion can be provided in some cases. For additional information, go to Cost Allocation Guidelines for Products and Services.

Two-out-of-five year rule. An entity (school or library location) can only receive Internal Connections funding every two out of five years. However, support for the basic maintenance of eligible Internal Connections components is exempt from this restriction, and can be obtained each fund year. For further information, go to “Two Out of Five Rule” for Internal Connections.

Free Services. Applicants must ensure that funding requests meet SLD program rules, and are not used in a manner that constitutes waste, fraud, or abuse of program funds. Free services, kickbacks, or other methods that subsidize the procurement of ineligible components, or enable other prohibited practices, can cause dismissal of funding requests and in some cases will lead to enforcement action by the Department of Justice. Go to the Free Services Advisory for a further understanding of prohibited practices.

Service substitutions and SPIN changes. Sometimes applicants find that they wish to change the specification of the products and services for which they have received E-rate discounts, or wish to change to a different service provider. Within certain limitations, such changes can be made. For additional information, go to Service Substitutions or SPIN Change Guidance. (SPIN is an acronym for “service provider identification number.”)

Transfers and trade-ins of components. The ability to transfer components purchased with E-rate discounts to other entities or locations is restricted. For additional information, go to Transfers of Equipment, which also includes references to information about equipment trade-ins.

Wide Area Networks. The lease of digital transmission lines that accomplish a wide area network (WAN) can be eligible for E-rate discounts, but FCC eligibility requirements for Wide Area Network configurations can be sophisticated. For example, the SLD will in some cases review whether an arrangement, even if labeled a “lease” of WAN services, reaches essentially the same result as the purchase of WAN facilities by applicants, which is ineligible for E-rate discounts. In addition, while components at the applicant site are generally evaluated for E-rate discounts as Internal Connections, in certain limited cases such components can be considered part of a Priority 1 service, i.e., part of a telecommunications or Internet Access service. For additional information about these topics, go to the Wide Area Network (WAN) Fact Sheet and the document On-premise Priority 1 Equipment.

Frequently Asked Questions. Additional areas of interest appear in the Frequently Asked Questions section of the SLD website. For questions involving the E-rate eligibility of products and services, go to Frequently Asked Questions about Eligibility of Products and Services.

There are many other important aspects of the Schools and Libraries Support Mechanism beyond product and service eligibility. Go to Program Overview for a general description of the E-rate processing cycle, including a description of key events that take place for the July 1 through June 30 fund year cycle. Go to Discount Matrix for an understanding of the discounts available to schools and libraries. In addition, the Reference Area of the SLD website has further information about particular aspects of the E-rate program.


Content Last Modified: September 28, 2005