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Wide Area Network (WAN) Fact Sheet

1.

Definition of a Wide Area Network

2.

Examples of Discounts on Wide Area Networks

3.

Definition of Internal Connections

4.

On-premise Equipment for End-to-end Service

5.

Evaluation of the Applicant Ownership Prohibition

6.

Amortization of Capital Investment Costs

7.

Services to Administrative Offices and Buildings

1. Definition of a Wide Area Network

A wide area network (WAN) is a voice, data, or video network that provides connections from one or more computers or networks within an eligible school or library to one or more computers or networks that are external to such eligible school or library. Excluded from this definition is a network that provides connections between or among instructional buildings of a single school campus or between or among non-administrative buildings of a single library outlet/branch.

FCC rules provide that, to the extent that states, schools, or libraries build or purchase a wide area network, the cost of such wide area networks is not eligible for discounts [47 C.F.R. 54.518]. However, wide area network capability can be obtained as a Telecommunications Service. Additionally, wide area network service can be eligible for discount as Internet Access, if leasing of the wide area network is the most cost effective means of obtaining Internet access.

Thus, applicants can obtain discounts for the services of wide area networks by leasing these services under the program rules that apply to Telecommunications Services and Internet Access, but not by procuring WAN components as Internal Connections. The term "lease" is used to refer to arrangements whereby the ownership of the facility remains with the service provider. No ownership attributes are undertaken by the lessee. Whether or not an arrangement constitutes a lease will be based on a review of contractual terms and conditions.

An understanding of how SLD defines local area networks, other Internal Connections, and wide area networks is important to ensure that applicants submit Funding Requests which contain only eligible products and services. In addition, applicants should understand the eligibility requirements for the three categories of service - Telecommunications Services, Internet Access, and Internal Connections. For example, Telecommunications Services can only be provided by an eligible Telecommunications Service provider. (For further information, see the document Eligible Services Framework posted in the Reference Area of this web site.)

SLD program rules provide that the actual wires that carry data across public rights-of-way and the components located outside a school or library facility are WAN components and are evaluated for eligibility under Telecommunications Services and Internet Access. Networking components located within a school or library facility are most often Internal Connections rather than WAN components; however, there are exceptions to this general rule.

1. If certain conditions are met, components located at a school or library can be considered part of end-to-end Telecommunications Services or Internet Access, and can then be funded under these categories of service, rather than as Internal Connections. Further information is provided in Section 4 below.

2. For Wireless WANs, the radio frequency components such as transmitter and antenna are considered to achieve the same functionality as wide area network cabling, and are therefore eligible within the Telecommunications Service or Internet Access categories of service, and not as Internal Connections.

FCC rules establish a rebuttable presumption that a connection does not constitute an Internal Connection if it crosses a public right-of-way [47 C.F.R. 54.506] (see Section 3 below).

2. Examples of Discounts on Wide Area Networks

Assume that the computers of a school district and library system are connected and share information among the various buildings, and use the network for voice telecommunications services, data transmission and for Internet access. The connections between the buildings are leased from an eligible Telecommunications Service provider. The price of the connections is eligible for discounts as a Telecommunications Service.

Assume that the computers of a school district and library system are connected and share access to the Internet. The connections between buildings are telephone lines or wireless services leased from an eligible Telecommunications Service provider. The cost of leasing the telephone lines or wireless service is eligible for discounts as a Telecommunications Service.

Assume that the computers of a school district and library system are connected among the various buildings in order to share access to the Internet. The connections between buildings are leased from a non-telecommunications provider such as a cable company, and are the most cost-effective means of accessing the Internet. The cost of leasing the connections is eligible for discounts as Internet Access.

Assume that the computers of a school district and library system are connected and share information among the various buildings and use the network for voice telecommunications and for the transmission of data. The connections between buildings were purchased and installed by the school district and library system. These connections are not eligible for discounts because the connections are purchased and installed by the school district and library system.

Assume that the computers of a school district and library system are connected and share information among the various buildings, and use the network for voice telecommunications, transmission of data, and Internet access. The connections between buildings are leased from a non-telecommunications service provider. Assume further that this method of accessing the Internet is the most cost effective. The price of the leased lines allocated to the cost of obtaining Internet access is eligible for discounts. This price must be determined in accordance with SLD's cost allocation guidelines. (See the document Cost Allocation Guidelines for Products and Services that Contain Eligible and Ineligible Components posted in the Reference Area of this web site.) The remaining price attributable to the leased connections for voice telecommunications and data telecommunications is not eligible for discounts, since the service is not being provided by an eligible Telecommunications Service provider.

3. Definition of Internal Connections

As previously indicated, there is a rebuttable presumption that a connection does not constitute an Internal Connection (i.e., it is a wide area network) if it crosses a public right-of-way [47 C.F.R. 54.506]. For more information, please refer to specific entries in the Eligible Services List and to Frequently Asked Questions about Eligibility of Products and Services, both of which are posted in the Reference Area of this web site.

4. On-premise Equipment for End-to-end Service

In some instances, service providers may install equipment on the premises of schools or libraries as part of their provision of eligible Telecommunications Services or Internet Access. That equipment may be considered as part of the provision of end-to-end Telecommunications Services or Internet Access (and not as Internal Connections) if the applicant demonstrates that it meets all of the following criteria:

  • It will be provided by the same service provider that provides the service, and ownership will not transfer to the school or library in the future.
  • The relevant contract or lease does not include an option to purchase the equipment by the school or library.
  • The school or library has no contractual right to exclusive use of the equipment.
  • Up-front, non-recurring charges are less than 67% of total charges (recurring plus non-recurring charges).
  • The equipment will not be used by the school or library for any purpose other than receipt of the eligible Telecommunications Services or Internet Access of which it is a part.
  • The Local Area Network for data communications of the school or library is functional without dependence on the equipment.
  • Responsibility for maintaining the equipment rests with the service provider, not the school or library.

The equipment must be directly related to the end-to-end provision of service by the service provider. If one or more of these criteria are not met, the equipment would be considered to be Internal Connections.

5. Evaluation of the Applicant Ownership Prohibition

Costs of eligible Telecommunications Services and Internet Access must not provide ownership interest to applicants. Eligible costs in these two categories of service are for services only, not applicant ownership.

The FCC has recognized that some business arrangements between an applicant and service provider, even if labeled a lease of services, can reach essentially the same result as a prohibited WAN purchase by applicants. The SLD will not commit to discounts on an agreement that is titled or described as a lease when in effect the terms of the agreement constitute a purchase.

Factors evaluated when making this determination include whether the applicant has exclusive access to the WAN facilities, whether a lease-purchase agreement exists, and whether a substantial payment for upfront capital costs is part of the agreement. Contracts with an option for the applicant to purchase WAN facilities will not be funded.

In addition, the SLD will not fund the initial construction costs for WAN facilities being built for the exclusive use of an applicant, except in established rural areas where no acceptable alternatives exist. Except in such rural areas, applicants are expected to utilize the shared infrastructure facilities of service providers in order to obtain the most cost effective service.

Although program funds may not be used to fund the full construction costs of Wide Area Network facilities in a non-rural area, funds may be used for a proportionate cost of WAN facilities that can be shared among multiple organizations.

The SLD will review contractual terms, the technical configuration, and up-front constructions costs to determine whether exclusive use is being provided. Costs in funding requests may be compared against the total costs of a service provider’s construction project. These review steps will allow the SLD to determine whether the funding request is consistent with a simple lease of facilities (eligible), or whether it reaches essentially the same result as a prohibited WAN purchase by an applicant (not eligible).

6. Amortization of Capital Investment Costs

Eligible Telecommunications Services and Internet Access can include service provider equipment costs, and/or a non-recurring charge for capital investment by the service provider. However, in cases where the upfront or non-recurring charge is greater than $500,000, this charge must be prorated over a period of at least three years.

Costs of eligible Telecommunications Services and Internet Access must not provide ownership interest to applicants. Eligible costs in these two categories of service are for services only, not applicant ownership.

7. Services to Administrative Offices and Buildings

Related information is provided in the Reference Area of this web site in the document entitled Administrative Offices and Buildings Fact Sheet. This document describes the conditions under which services and facilities at non-instructional areas (for schools) and non-public areas (for libraries) are eligible for discount.

  Content Last Modified: May 16, 2003