Before the
                Federal Communications Commission
                      Washington, D.C. 20554
                                             
In the Matter of                        )
                                   )
Request for Review                      )
of the Decision of                      )
the Universal Service Administrator by       )                        
               )
Grant School District #3                )    File No. SLD 10474       John
Day, Oregon                        )                   
                                   )
Federal-State Joint Board on Universal Service    )    CC Docket No. 96-45
                                   )
Changes to the Board of Directors            )    CC Docket No. 97-21
of the National Exchange Carrier             )    
Association, Inc.                       )
                                
                             ORDER
                                
Adopted:  October 29, 1999                                           Released:  October 29, 1999
                                
By the Common Carrier Bureau:

     1.   The Bureau has under consideration a Letter of Appeal filed by Grant School
District #3 (Grant) on June 1, 1999, seeking review of a decision issued by the Schools and
Libraries Division (SLD) of the Universal Service Administrative Company (Administrator). 
Grant seeks review of the SLD's denial of its application for discounts under the schools and
libraries universal service support mechanism.  For the reasons set forth below, we grant the
Letter of Appeal to the extent provided herein.

     2.   Under the schools and libraries universal service support mechanism, eligible
schools, libraries, and consortia that include eligible schools and libraries, may apply for
discounts for eligible telecommunications services, Internet access, and internal connections.  

     3.   By letter dated January 26, 1999, the SLD denied Grant's request for discounts. 
Grant appealed the SLD's decision by letter dated February 8, 1999.  On April 29, 1999, the SLD
affirmed its initial funding decision. The Administrator's Decision on Appeal indicated that
services listed by Grant as dedicated access/Internet access included some internal connection
services.  It further indicated that, where a particular funding request included some internal
connections, the entire funding request was recategorized by SLD as internal connection services
so as to "avoid the possibility of treating priority two services (internal connections) as priority
one services (telecommunications, dedicated and Internet access services)."  Because internal
connections are funded only when a discount level of 70% or above has been shown, these
services could not be supported for this funding period.  

     4.   In its request for review of the SLD's decision that is now before us, Grant states
that it relied on information provided by the SLD directing it to classify bundled Internet services
as Internet access on its FCC Form 471.  Grant also cites to paragraph 445 of the First Report
and Order to support its position that it should receive discounts for the cost of "bundled"
services.  Grant argues that, because of the misinformation provided by SLD, the amount
representing Internet access should be reclassified as such, and should be deemed eligible for
discounts.  In addition, Grant maintains that its discount level should have been calculated as
65% instead of SLD's 60% finding. 
     
     5.   In Williamsburg-James City, the Commission determined that, in cases where, as
here, an FCC Form 471 was submitted before the establishment of the Commission's rules of
priority in the Fifth Reconsideration Order, applicants could not have been aware of the need to
segregate carefully their service requests.  Consequently, the Commission held that, in appeals
addressing such circumstances, applications should be remanded to SLD for reprocessing, with
priority one and priority two services being considered separately on their own merits. We,
therefore, remand Grant's application to SLD and direct SLD to issue a new funding commitment
decision letter based on the originally submitted FCC Form 471 and any further consultations
with the applicant that may be necessary.       
     

     6.    As noted above, in the Fifth Reconsideration Order, the Commission established
rules to govern how discounts will be granted when available funding is less than total demand. 
These rules provide that requests for telecommunications and Internet access services for all
discount categories shall receive first priority for available funds.  When sufficient funds are not
available to fund all requests for discounts on internal connections, the Administrator shall
allocate funds for discounts to schools beginning with those applicants at the ninety percent
discount level and, to the extent funds remain, continue to allocate funds for discounts to
applicants at each descending single discount percentage, e.g., eighty-nine percent, eighty-eight
percent, and so on.  For the first funding year, the Administrator allocated funds to cover
discounts down to the seventy percent level.  Thus, we do not need to address Grant's claim that
its reimbursement level was miscalculated, because, even if Grant's assessment of its
reimbursement rate is correct, it still falls below seventy percent and thus Grant would not be
eligible for internal connections discounts.
               
     7.   ACCORDINGLY, IT IS ORDERED, pursuant to authority delegated under
sections 0.91, 0.291, and 54.722(a) of the Commission's rules, 47 C.F.R.  0.91, 0.291, and
54.722 (a), that the Letter of Appeal filed by Grant School District #3, John Day, Oregon, on
June 1, 1999 IS GRANTED to the extent indicated herein.

     8.    IT IS FURTHER ORDERED that the Administrator IS DIRECTED to
implement the decision herein.                    

                              

                              FEDERAL COMMUNICATIONS COMMISSION


                              Yog R. Varma
                              Deputy Chief, Common Carrier Bureau