Sec. 54.505  Discounts.

    (a) Discount mechanism. Discounts for eligible schools and libraries 
shall be set as a percentage discount from the pre-discount price.
    (b) Discount percentages. The discounts available to eligible 
schools and libraries shall range from 20 percent to

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90 percent of the pre-discount price for all eligible services provided 
by eligible providers, as defined in this subpart. The discounts 
available to a particular school, library, or consortium of only such 
entities shall be determined by indicators of poverty and high cost.
    (1) For schools and school districts, the level of poverty shall be 
measured by the percentage of their student enrollment that is eligible 
for a free or reduced price lunch under the national school lunch 
program or a federally-approved alternative mechanism. School districts 
applying for eligible services on behalf of their individual schools may 
calculate the district-wide percentage of eligible students using a 
weighted average. For example, a school district would divide the total 
number of students in the district eligible for the national school 
lunch program by the total number of students in the district to compute 
the district-wide percentage of eligible students. Alternatively, the 
district could apply on behalf of individual schools and use the 
respective percentage discounts for which the individual schools are 
eligible.
    (2) For libraries and library consortia, the level of poverty shall 
be based on the percentage of the student enrollment that is eligible 
for a free or reduced price lunch under the national school lunch 
program or a federally-approved alternative mechanism in the public 
school district in which they are located. If the library is not in a 
school district then its level of poverty shall be based on an average 
of the percentage of students eligible for the national school lunch 
program in each of the school districts that children living in the 
library's location attend. Library systems applying for discounted 
services on behalf of their individual branches shall calculate the 
system-wide percentage of eligible families using an unweighted average 
based on the percentage of the student enrollment that is eligible for a 
free or reduced price lunch under the national school lunch program in 
the public school district in which they are located for each of their 
branches or facilities.
    (3) The Schools and Libraries Corporation shall classify schools and 
libraries as ``urban'' or ``rural'' based on location in an urban or 
rural area, according to the following desigantions.
    (i) Schools and libraries located in metropolitan counties, as 
measured by the Office of Management and Budget's Metropolitan 
Statistical Area method, shall be designated as urban, except for those 
schools and libraries located within metropolitan counties identified by 
census block or tract in the Goldsmith Modification.
    (ii) Schools and libraries located in non-metropolitan counties, as 
measured by the Office of Management and Budget's Metropolitan 
Statistical Area method, shall be designated as rural. Schools and 
libraries located in rural areas within metropolitan counties identified 
by census block or tract in the Goldsmith Modification shall also be 
designated as rural.
    (c) Matrix. The Schools and Libraries Corporation shall use the 
following matrix to set a discount rate to be applied to eligible 
interstate services purchased by eligible schools, school districts, 
libraries, or library consortia based on the institution's level of 
poverty and location in an ``urban'' or ``rural'' area.

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                   Schools and Libraries discount matrix                               Discount level           
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                            How disadvantaged?                                                                  
---------------------------------------------------------------------------   Urban discount     Rural discount 
         % of students eligible for national school lunch program                                               
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1.........................................................................                 20                 25
1-19......................................................................                 40                 50
20-34.....................................................................                 50                 60
35-49.....................................................................                 60                 70
50-74.....................................................................                 80                 80
75-100....................................................................                 90                 90
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    (d) Consortia. Consortia applying for discounted services on behalf 
of their members shall calculate the portion of the total bill eligible 
for a discount

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using a weighted average based on the share of the pre-discount price 
for which each eligible school or library agrees to be financially 
liable. Each eligible school, school district, library or library 
consortia will be credited with the discount to which it is entitled.
    (e) Interstate and intrastate services. Federal universal service 
support for schools and libraries shall be provided for both interstate 
and intrastate services.
    (1) Federal universal service support under this subpart for 
eligible schools and libraries in a state is contingent upon the 
establishment of intrastate discounts no less than the discounts 
applicable for interstate services.
    (2) A state may, however, secure a temporary waiver of this latter 
requirement based on unusually compelling conditions.

[ 62 FR 32948 , June 17, 1997, as amended at  62 FR 41304 , Aug. 1, 1997]