This study examines the role of external funding in the development of public library network resources and services, their identification, and their benefit and impact, particularly as they affect the digital divide. The study was conducted between February 2001 and January 2002, employing a range of data collection techniques, including site visits, focus groups, surveys analysis of E-rate data sources, local library and state library reports, documents from external funders, and other material. Key findings and issues include: (1) LSTA (Library Services and Technology Act) is a model federal program for funding libraries; (2) E-rate funding is essential to local operations, but needs fine-tuning; (3) leveraging external support to serve those impacted by the digital divide; (4) equipment was not enough; (5) coordination was necessary and the State Library delivered; (6) someone must have authority and responsibility for seeking external funds; (7) remembering the poorest counties and communities; (8) maintaining sustainability; and (9) understanding situational factors. Conclusions, next steps, and recommendations are presented. Appendices include LSTA state plan requirements and assurances, SLD (Schools and Libraries Division) analysis method and description of tables, site visit participants, selected study instruments, and advisory committee members. (Contains 75 references.) (MES)