News of the Week

This week the SLD announced a relaxation of the rule. BEARs for any funding year now will be processed as long as the associated vendor has SPAC on file for FY 2003. This is an especially timely change since most schools and libraries are now filing yearend BEARs for FY 2002.

Note that applicants must still be concerned that their vendors have at least a 2003 SPAC filed. Some vendors do not. The status of a vendor’s SPAC filings can be found in the right-hand column of the vendor information available in the SLD’s SPIN Search listing (SPIN Contact Search).

Vendors providing discounted bills using the Service Provider Invoice form (“SPI” or Form 474) process should also note that this change is applicable only to BEARs. SPIs for a given funding year will continue to be processed only if SPACs are on file for the same year.

BEAR Payments and Bankruptcies

An interesting issue is what happens, in the fortunately infrequent case, when USAC sends a BEAR payment to a vendor that becomes bankrupt before the payment can be relayed to the applicant. What happens to the money? The answer seems to be: it depends.

Because of this uncertainty, the SLD tries to avoid sending BEAR payments to a bankrupt vendor unless and until the specifics of the vendor’s situation are clarified. Generally, in a Chapter 11 bankruptcy, under which a company continues in operation, BEAR payments can be processed normally. Even in these cases, however, the SLD requires a formal letter from the vendor attesting to its ability to pass on E-rate payments.

In a Chapter 7 bankruptcy, involving company liquidation, the problem is more difficult. If a BEAR payment has not yet been made, the solution is to use a “Good Samaritan” company to receive and pass on the payment (for additional information, see Good Samaritan). If a BEAR payment has already been sent to a company, however, the trick is avoid having the funds tied up in a bankruptcy proceeding with the applicant simply becoming another unsecured creditor. At the heart of the issue is the question: who owns the E-rate payment?

Although the specifics of each situation may take some time to resolve, the good news is that the few related court cases to date have all affirmed the applicant’s ownership. The most recent decision, as reported by Funds for Learning, is a U.S. Court of Appeals reaffirmation that an E-rate reimbursement is the property of the E-rate applicant. This precedent may also be useful to applicants in other situations in which a vendor attempts to avoid passing on BEAR reimbursement payments for other reasons.

FCC Reply Comments Due August 19

The easiest way to file reply comments in this rulemaking is to do so via the FCC Web site. Detailed instructions for filing comments can be found at the end of the Order. Comments are not required to be in any specific or legalistic format, but should reference “CC Docket No. 02-6.”

Note that it is appropriate to file reply comments not only in opposition to comments by others, but to support the recommendations of others and to urge early adoption. As first presented several weeks ago, the following is a summary of some of the more significant filings made to date on which reply comments might be submitted:

(1) The State E-rate Coordinators’ Alliance (“SECA”) and the American Library Association proposed a number of program changes to improve administrative practices, including a reduction in the maximum Priority 2 discount rate (see SECA comments).

(2) Comments by E-Rate Central, a member of SECA, include a summary of a study analyzing the impact of the proposed discount rate reduction for Internal Connections (see E-Rate Central comments).

(3) The Consortium for School Networking and the International Society for Technology in Education provided detailed comments on debarment issues (see CoSN comments).

(4) Activities of the SLD’s Waste, Fraud, and Abuse Task Force, which are not formally part of the FCC’s NPRM comments, but which will result in a final report in September, can be found in the Task Force section of the SLD Web site. An update on the Task Force’s third meeting includes two major recommendations, one to reduce the maximum discount on Internal Connections and another to establish at least some ceiling on the amount of funding which any one applicant can request (see Task Force Update).

Other comments (or reply comments, as they are filed) an be found by using the “Search for Filed Comments” facility on the FCC Web site (see Search for Filed Comments). To use this search function, enter “02-6” in Box 1 (“Proceeding”), and click “Retrieve Document List.” Comments will be listed starting with the most recent filings.