FCC proposed changing way it allocates e-rate funds when there is...

in previous year. Commission said requests for telecom services still would get top priority. Change would apply to next step, known as Priority 2 -- requests for internal connections. FCC said demand for funding in year beginning July 1 was $5.2 billion, more than double $2.25 billion cap. Once requests for telecom service are fulfilled, there only $900 million will be left for Priority 2 internal connections. Under current rules, neediest schools and libraries -- those eligible for 90% discounts -- will get first crack at remaining funds. However, those institutions alone seek more than $900 million available, FCC said. That means agency can ask for comment on 2 options: (1) Give out remaining $900 million to all 90% institutions on pro rata basis, meaning each would get only portion of amount requested. That could mean applicants “might not receive sufficient funding to permit completion of a useful system of internal connections,” Commission said. (2) Give funding priority to those that didn’t receive funding in past year. Institutions would be funded in order of their discount level. FCC said that would ease its concern “that applicants eligible for 90% discounts could receive funding… for 2 years in a row while other schools that are also economically disadvantaged, albeit not to the same degree, could receive no discounts at all.” E-rate funds offer discounts to schools and libraries that are installing telecom services or internal connections, with discounts on sliding scale, largest going to neediest institutions.