FCC Releases Final Order Depicting Rules for Hotspot Initiative

On Monday, July 29, 2024 the Commission released the final Report and Order (“Final Order”) depicting the rules governing its new hotspot lending initiative. Check out SHLB’s previous blog about the Commission’s effort to make Wi-Fi hotspots and Internet services eligible for E-rate program funding for libraries and K-12 schools.  

The Final Order is detailed, parsing through elements like equipment/service eligibility requirements and a three-year school and library budget framework that caps an applicant’s funding request. It also focuses particular attention on rules meant to safeguard the E-rate program, like those for monitoring service usage, guarding against device warehousing/storing, and recordkeeping.

The Commission also tee’d up a Further Notice of Proposed Rulemaking, asking questions aimed at ensuring the efficient use of program funds and hotspot devices/services.  Public comment will be due 45 days after the Final Order is published in the Federal Register.

Below we highlight certain items from the Final Order. Whether or not you are well-versed in current E-rate rules and application procedures, it is imperative that you familiarize yourself with the entirety of the Final Order if you plan to support your own hotspot lending program.  

Also, be sure to check out SHLB’s informational webinar where we discussed this initiative (hosted on July 31, 2024).

Eligible Equipment and Services

A “Wi-Fi hotspot” means a device that is intended to provide Wi-Fi connectivity to a hotspot user as its sole function.  Devices must be (1) portable; and (2) a single device (i.e., not a set of linked devices). 

What is Ineligible?

The Commission specifically set out the following as ineligible for E-rate support:

• Other multi-functional devices that can support Wi-Fi. Multi-functional devices like smartphones, PCs, notebooks, tablets, customer premises equipment, routers or switches, and wireless access points, are not eligible for E-rate support.

• Service to broadband-enabled end user devices. Applicants may not request mobile wireless services that would be delivered to broadband-enabled end user devices like laptops, tablets.

• Service that is not commercially available. Wi-Fi hotspots must be for use with a commercially available mobile wireless Internet service, rather than for use with CBRS or other private network services. The Commission limits the use of services to those that can be supported by and delivered with Wi-Fi hotspots provided to an individual user, meaning that other technologies like fixed wireless connections and the related equipment, private 5G/LTE networks, Citizens Band Radio Service (CBRS) and television white space (TVWS), fiber, and network expansion or construction are not eligible.

Acceptable Use Policies

Schools and libraries must adopt an acceptable use policy (AUP) that highlights the goal of the lending program: to provide broadband access to students and library patrons who need it.  

The AUP must also clearly state that off-premises use must be primarily for an educational purpose.

• For schools, this means that the AUP must state that the use must be “integral, immediate, and proximate to the education of students.”

• For libraries, the AUP must clearly state that the use must be “integral, immediate, and proximate to the provision of library services to library patrons.”

Schools and libraries must provide hotspot recipients with notice of their AUP (and post it publicly).

Budgeting Framework

The Commission created a pre-discount budget mechanism whereby eligible schools and libraries can request a limited number of devices and services, if they have need for them. 

Device and Service Caps

The Final Order establishes a pre-discount $15 per month limit on recurring mobile wireless Internet service and a pre-discount $90 per Wi-Fi hotspot limit. 

• Applicants may purchase hotspots and services that cost more than these funding caps, but you cannot receive an E-rate commitment for an amount that exceeds the funding cap.

Taxes and state electronic waste fees are not included in the capped amounts; all taxes and fees should be separately identified on invoices and requested on a separate funding line. Delivery fees, activation, and configuration costs are included in the capped amounts.

An Applicant’s Three-Year Pre-Discount Budget

Applicants must calculate a hotspot and service budget, which will serve as the maximum amount of pre-discount funding they are permitted over three funding years.  

The budget formula takes into account an applicant’s size and category one discount rate: 

• School applicants are limited to 20 hotspots per 100 students and library applicants are limited to 5.5 hotspots per 1,000 library square feet, adjusted by their discount rate. (This resulting number is rounded up to the nearest ten.)  

• The result is multiplied by the three-year cost of the device and service funding caps mentioned above ($630).

Schools and libraries may not request more than 45% of their three-year budget in any year.

Applicants are subject to current E-rate program rules requiring that schools and libraries are responsible for paying the non-discounted share of the costs, and the competitive bidding rules, using price as the primary factor considered when selecting the most cost-effective offering.

This budget formula is shown below:

The first fixed three-year budget cycle begins with funding years 2025 through 2027, which will reset thereafter.

Program Safeguards

Warehousing

The Commission prohibits applicants from warehousing hotspots.  This means that schools and libraries cannot request funding for hotspots for future use, to store in case of an emergency, or to store in case of theft, loss, or breakage. Each hotspot must be associated with a line of service.

In the event of loss or breakage, applicants may:

• purchase extra devices with other sources of funding to use with the E-Rate supported service; or 

• request replacement devices paired with lines of service in the next funding year if they have not exhausted their budgets. 

Applicants that do not replace lost or broken hotspots must work with their service providers to discontinue the associated service. Service providers must exclude or waive any associated early termination fees if service is discontinued.

Usage

At least once every 31 days, service providers must identify lines of service that have gone unused for no less than 60 days. The provider must then give 30 days’ notice to the school or library that if the service is not used within the 30-day period, that service line will be terminated. If a service line is terminated for non-usage, service providers cannot bill the applicant for the balance of the cost.

When a school or library receives a non-usage notice, it should take steps to determine whether the device and services are being used, should be redistributed, or should be discontinued. 

Service providers must provide data usage reports to applicants at least once per billing period. Applicants are expected to review these reports and to take actions to address non-usage.

Equipment Disposal

Schools and libraries are prohibited from selling, reselling, or transferring equipment in consideration of money or any other thing of value for three years after its purchase.

Recordkeeping

E-Rate participants must maintain asset and service inventories of each hotspot and wireless service provided for use off-premises.

For school participants the asset and service inventory must identify: 

1. the equipment make/model;

2. the equipment serial number;

3. the full name of the person to whom the equipment was provided;

4. the dates the equipment was loaned out and returned, or the date the school was notified that the equipment was missing, lost, or damaged; and

5. service detail (the line number or other unique identifier that associates a device to that particular line of service). 

For library participants, the asset and service inventory must identify:

1. the equipment make/model;

2. the equipment serial number;

3. the dates the equipment was loaned out and returned, or the date the library was notified that the equipment was missing, lost, or damaged; and

4. service detail. 

Program participants must retain documentation (including the asset and service inventories, AUPs, evidence of publicizing hotspot availability, and other required documentation) for at least 10 years after the latter of the last day of the applicable funding year or the service delivery deadline for the funding request.