News of the Week

Funding Status

The SLD announced that the application window for FY 2011 would open at noon EST on Tuesday, January 11, 2011 - "1/11/11" - and close at 11:59 p.m. EST on Thursday, March 24, 2011 (see News Brief dated December 9, 2010.)

Wave 30 for FY 2010 will be released on Tuesday, December 14th. Cumulative funding for FY 2010 is $1.88 billion. Priority 2 funding is currently being provided at 85% and above. No funding wave for FY 2009 is scheduled for this week.

Gifts vs. Donations

Under the new E-rate rules, applicants and their employees are subject to strict gift rules, largely paralleling federal agency gift rules. Given USAC's recent enforcement activities based on state and local gift rules, which also apply, applicants are rightly leery of taking or accepting anything from existing or potential service providers. We discussed these new gift rules in some detail in two earlier newsletter articles (see Gift Prohibitions - Part 1 and Gift Prohibitions - Part 2). But how do the new rules treat charitable donations?

Paragraph 90 of the FCC's 6th Report and Order (FCC-10-175) states the following:

The rule we articulate today does not discourage companies from making charitable donations to E-rate eligible entities in the support of schools — including, for example, literacy programs, scholarships, and capital improvements — as long as such contributions are not directly or indirectly related to E-rate procurement activities or decisions. If contributions have no relationship to the procurement of E-rate eligible services and are not given by service providers to circumvent our rules, including rules that require schools and libraries to pay their own non-discount share for the services they are purchasing, such contributions will not violate the prohibition against gift giving. If applicants or service providers are unclear about a particular anticipated gift, they should seek guidance from USAC or the FCC.

The last sentence is particularly interesting because it suggests some procedure whereby an applicant could vet a potential donation with either USAC or the FCC prior to acceptance. The problem, of course, is that no such procedure exists today — and may never exist.

While USAC may not be set up to review and pre-approve a donation by an E-rate vendor, it is unlikely to have any qualms about reviewing a donation after the fact. Should USAC then rule that the "donation" was really a prohibited gift, the applicant would be subject to a COMAD and repayment demand.

Our recommendation is that, at least for the next few months, applicants refrain from accepting any donations by potential E-rate vendors. If no further clarification is forthcoming, we suggest the following guidelines:

1. Use some common sense. Yes, we know that rules and common sense are not synonymous, but not using common sense is clearly nonsensical.
2. Do not accept donations from potential vendors in and around any E-rate procurement activity.
3. Sunshine is the best preventative medicine. In particular:
   1. Any donation should be formally accepted by the school or library board, and publicly disclosed. Formal acceptance should include a clear statement that there is no explicit or implicit advantage to be gained by the donor as to future business. As an example, consider a statement recently made by the FCC seeking equipment donations to its Technology Experience Center, reading in part:
      
      Donation to the Center is strictly voluntary and is not contingent on and does not imply any expected benefit to the donor. Acceptance of any donated device or item by the FCC does not constitute endorsement of the device, its manufacturer, vendor, or any company offering such device.
       
   2. A donor should be asked to formally certify that the donation: (i) is being made without any explicit or implicit expectations of being awarded business; and (ii) is consistent with a company-sponsored program of donations to educational institutions independent of customer status.

1. A description of the proposed donation, disclosures, and certifications should be sent to USAC for review. Although USAC may have no review procedure in place, and may not respond, such a request would be consistent with the FCC's guidance that the applicant "seek guidance from USAC or the FCC."

E-Rate Updates and Reminders

Consortium LOAs:

The sample consortium letter of agency ("LOA") provided on the SLD Web site has not yet been updated to reflect the new E-rate rules and the corresponding changes to the certifications on the revised Form 470 and Form 471. Although LOAs modeled on the SLD's existing sample should be fine for FY 2011, consortia revising LOAs for their members may want to incorporate the following updates to two of the paragraphs (see underlined changes):

3. I certify that, if required by Commission rules, our [Insert Type of Entity (e.g. school(s), school districts(s), library(ies))] is/are covered by a technology plan(s) that is written, that covers all 12 months of the funding year, and that has been or will be approved by a state or other authorized body, or an SLD-certified technology plan approver, prior to the commencement of service.
   
   Note: This change reflects the broader exemption from technology plan requirements for all Priority 1 services.
4. I certify that the services the school, library or district purchases at discounts provided by 47 U.S.C. § 254 will be used primarily for educational purposes and will not be sold, resold, or transferred in consideration for money or any other thing of value, except as permitted by the Commission's rules at 47 C.F.R. §§ 54.500, 54.513. Additionally, I certify that the entity or entities participating in this consortium have not received anything of value or a promise of anything of value, other than services and equipment sought by means of this consortium, from the service provider, or any representative or agent thereof, or any consultant, in connection with this request for services.
   
   Note: This change reflects: (i) the allowed after-hours use of school E-rate facilities by the community at large; and (ii) the additional emphasis on the "free services" prohibition.

EDU2011 Applications Are Due December 17:

Applications for the FCC's EDU2011 pilot program on wireless Internet access services for off-campus student use are due by Friday, December 17, 2011.

E-Rate Central is encouraging schools applying for the EDU2011 program to become involved in its K-12 e-Bookroom Initiative. We have found that most publishers' e-book practices are geared towards individual purchasers. By way of contrast, the K-12 market needs to purchase e-books in bulk, and to provide for their use by multiple students over multiple years. E-Rate Central thinks that a concerted effort by participants in the FCC's EDU2011 pilot — which is expected to be a high-profile program — would provide much needed leverage for promoting K-12-friendly e-book licensing policies. We believe that this effort would be viewed by the FCC as a potentially positive outcome of its pilot program, and we urge EDU2011 applicants to include plans to participate in the K-12 e-Bookroom Initiative in their applications. For additional information, please contact Win Himsworth at whimsworth@e-ratecentral.com.

Schools and Libraries News Brief dated December 10 - Consultant Registration

The SLD's December 10th News Brief outlines the new consultant registration procedures required in connection with the new versions of the Form 470 and Form 471. Both forms require applicants to identify E-rate consultants used in the filing process.

For disclosure purposes, a "consultant" is defined as "...any non-employee of the entity applying for funding that assists in filling out the application materials for a fee. Consultants can be organizations with one or more employees or they can be individuals."

Each consulting firm or individual so used must obtain a Consultant Registration Number ("CRN") by contacting the SLD's Client Service Bureau (888-203-8100) and providing appropriate contact information. Applicants who, for some reason, cannot obtain CRN data for their own consultants, may get it by contacting the Client Service Bureau.

The FCC is currently soliciting comments on a more precise definition of "consultant" and on the confidentiality of CRN information. Comments are due by December 23, 2010; reply comments are due by January 7, 2011. (See our newsletter of November 29, 2010)