Sec. 54.507  Cap.

    (a) Amount of the annual cap. The annual cap on federal universal 
service support for schools and libraries shall be $2.25 billion per 
funding year, and all funding authority for a given funding year that is 
unused shall be carried forward into subsequent years for use in 
accordance with demand, with two exceptions. First, no more than $1 
billion shall be collected or spent for the funding period from January 
1, 1998 through June 30, 1998. Second, no more than half of the unused 
portion of the funding authority for calendar year 1998 shall be spent 
in calendar year 1999, and no more than half of the unused funding 
authority from calendar years 1998 and 1999 shall be used in calendar 
year 2000.
    (b) Funding year. The funding year for purposes of the schools and 
libraries cap shall be the calendar year.
    (c) Requests. Funds shall be available to fund discounts for 
eligible schools and libraries and consortia of such eligible entities 
on a first-come-first-served basis, with requests accepted beginning on 
the first of July prior to each funding year. The Schools and Libraries 
Corporation shall maintain a running tally of the funds already 
committed for the existing funding year on the school and library 
website.
    (d) Annual filing requirement. Schools and libraries, and consortia 
of such eligible entities shall file new funding requests for each 
funding year no sooner than the July 1 prior to the start of that 
funding year.
    (e) Long term contracts. If schools and libraries enter into long 
term contracts for eligible services, the Administrator shall only 
commit funds to cover the pro rata portion of such a long term contract 
scheduled to be delivered during the funding year for which universal 
service support is sought.
    (f) Date services must be supplied. The administrator shall not 
approve funding for service received by a school or library before 
January 1, 1998.
    (g) Rules of priority. When expenditures in any funding year reach 
the level where only $250 million remains before the cap will be 
reached, funds shall be distributed in accordance to the following rules 
of priority:
    (1) The Schools and Libraries Corporation shall post a message on 
the school and library website, notify the Commission, and take 
reasonable steps to notify the educational and library communities that 
commitments for the remaining $250 million of support will only be made 
available to the most economically disadvantaged schools and libraries 
(those in the two most disadvantaged categories) for the next 30 days or 
the remainder of the funding year, whichever is shorter.
    (2) The most economically disadvantaged schools and libraries (those 
in the two most disadvantaged categories) that have not received 
discounts from the universal service support mechanism in the previous 
or current funding years shall have exclusive rights to secure 
commitments for universal service support under this subpart for a 30-
day period or the remainder of the funding year, whichever is shorter. 
If such schools and libraries have received universal service support 
only for basic telephone service in the previous or current funding 
years, they shall remain eligible for the highest priority once spending 
commitments leave only $250 million remaining before the funding cap is 
reached.
    (3) Other economically disadvantaged schools and libraries (those in 
the two most disadvantaged categories) that

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have received discounts from the universal service support mechanism in 
the previous or current funding years shall have the next highest 
priority, if additional funds are available at the end of the 30-day 
period or the funding year, whichever is shorter.
    (4) The Administrator shall notify the Schools and Libraries 
Corporation of any funds still remaining after all requests submitted by 
schools and libraries described in paragraphs (f)(2) and (f)(3) of this 
section during the 30-day period have been met. The Schools and 
Libraries Corporation shall direct the Administrator to allocate the 
remaining available funds to all other eligible schools and libraries in 
the order in which their requests have been received by the Schools and 
Libraries Corporation, until the $250 million is exhausted or the 
funding year ends.

[ 62 FR 32948 , June 17, 1997, as amended at  62 FR 40748 , July 30, 1997; 
 62 FR 41304 , Aug. 1, 1997]