May 012013

The FCC recently proposed eliminating the “bundled services” exception to the E-Rate cost allocation rules. (See Public Notice, DA-13-592, rel. April 9, 2013.) Under this exception, service providers were allowed to offer free or discounted equipment – most typically free cell phones – to customers who signed a service contract. As long as the offer was made available to the public or a certain class of users, service providers were able to bundle ineligible end-user equipment with eligible services without needing to cost allocate the ineligible portion. The FCC proposes to change all that.

Under the new proposal, service providers must conduct a cost allocation in all instances in which ineligible equipment is bundled with eligible services. No longer will service providers be able to rely upon their free cell phone plans (or other bundled service arrangements) as justification for providing schools and libraries with free (or discounted) equipment. Beginning in Funding Year 2014, all ineligible components must be cost allocated “even if bundled with E-Rate eligible services and offered to the public or some class of users.”

Comments are due on May 23, 2013 and reply comments are due on June 7, 2013.

If you are interested in commenting, or would like to receive more information about the FCC’s proposed elimination of the “bundled services” exception to the E-Rate cost allocation rules, please contact the Troy Law Group (

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