News of the Week

Wave 2 Funding Commitment Decision Letters (FCDLs) for FY 2015 will be released on June 1st. The commitments are for approved requests for all service types and at all discount levels. To date commitments total over $153 million.

When FCDLs are received, applicants may begin to file their Form 486s. USAC has updated the online Form 486 for FY 2015. The updated form has been available for online filing since May 21st.

Wave 55 for FY 2014 will be released on Friday, May 29th. Funding for FY 2014 is available for Priority 1 services only; Priority 2 funding has been denied at all discount levels. Cumulative funding for FY 2014 is $2.21 billion.

On May 20, 2015 the FCC held a four-hour workshop on the new E-rate rules for fiber build projects, case studies on fiber projects, and planning tools for the projects. Special attention was devoted to the new fiber “self-provisioning” option for FY 2016. When applicants are unable to contract for cost-effective leased fiber facilities (dark or lit) from a service provider, they may now receive E-rate funding for the purchase of applicant-owned fiber network facilities. This new option was first announced in December 2014 in the Second E-rate Modernization Order FCC 14-189, and was made available to ensure that all applicants have the ability to obtain high speed broadband network circuits, even in those areas without service providers that are able to provide this service cost effectively.

The FCC repeatedly emphasized that the self-provisioning option is a last resort and is available only when applicants meet rigorous evidentiary requirements that include:

• First conducting a competitive procurement for a leased lit or dark fiber solution and not identifying a cost-effective solution.
• Issuing a detailed RFP, along with posting a FCC Form 470, that provides service providers with specific details and descriptions of the services needed and locations to be served.
• Allowing service providers ample time to formulate bids. The 28 day bidding period required under E-rate rules was noted to be a minimum time period, and it was suggested that a longer bidding period may be appropriate for these projects.
• Although an RFP may be issued at any time, applicants are not allowed to post a Form 470 for the procurement until on or after July 1, 2015. This means that the earliest proposals may be due would be July 28, 2015. Note:  The July 1st date is contingent on the Office of Management and Budget (“OMB”) approving a modified version of the Form 470.
• Ensuring that the evaluation of proposals for leased and purchase options is handled on a total cost of ownership approach including all aspects of installing, operating and maintaining the network facilities. The FCC staff also mentioned that a third party is working on a “total cost of ownership” tool to assist applicants in evaluating all relevant costs.

In addition, the FCC staff noted the amortization rules governing one-time installation costs have been suspended in order to facilitate the construction and installation of fiber facilities. Applicants are no longer restricted to amortizing one-time costs of $500,000 or more over three years. These costs can now be recouped in a single year. Furthermore, with service provider agreement, the applicant’s non-discounted share of installation charges may now be paid over a year period.

FCC rules also provide for additional discounts of up to 10% for new fiber builds if matched by state funds.

The FCC released a Public Notice and draft of the Eligible Services List (“ESL”) for FY 2016 last week (DA 15-615). Comments on the ESL are due June 22nd; reply comments are due July 6th.

The changes in the proposed ESL for FY 2016, albeit minor, include:

1. Additional explanatory “notes” have been added regarding leased lit and dark fiber and self-provisioned broadband networks stressing, in part, the importance of seeking competitive bids for the various alternatives.
2. The FCC proposes to clarify that equipment necessary to make broadband networks functional is eligible.
3. The FCC moves ISDN to voice services and explains that typically it is fully subject to the voice services phase down, but that ISDN may sometimes be used to provide bundled voice and data services. In the latter case, cost allocation is required to separate the two uses.
4. The FCC notes that basic firewall protection is eligible as an integral part of Internet service, but proposes to clarify that the same protection provided as a separately priced service, or by a third-party, would be eligible only under Category 2.

The proposed FY 2016 version continues the change begun last year to simplify and shorten the ESL. The FY 2015 ESL, including the important explanatory Order, totaled 21 pages. This year’s draft, including the less important Public Notice, is only 12 pages overall.

One consequence of this shortening process is that the ESL has become less definitive. A particularly frustrating aspect of this change is that the FCC notes that “Additional guidance from USAC about the E-rate application process and about eligible services, including a glossary of terms, is available at USAC’s website...”  The ESL, however, then goes on to stress that the additional USAC guidance is provided “just for informal guidance,” and “will not be used to determine whether a service or product is eligible.”

One example of the confusion this approach may cause — indeed, did cause during the early stages of PIA review this year — iis the issue of the eligibility of multi-year licenses for equipment such as WiFi controllers. In a News Brief dated February 27, 2015, USAC clarified that such licenses were eligible, in full, during the first year of equipment installation, but the draft ESL for FY 2016 fails to even mention such licenses.

Comments on the draft ESL from the E-rate community will hopefully encourage the FCC to make the ESL a bit more explicit.

Form 471 Certification Deadline:

Those who have not yet submitted their certifications must do so on or before May 26th, 2015. USAC sent warning letters three weeks ago to applicants who had filed timely the Form 471s online for the FY 2015, but according to USAC records, had not yet certified those applications. Check the current Application Status on the SLD website.

Form 486 Certifications:

Applicants who will be filing the Form 486 no longer need to certify that they have an approved technology plan. This certification is not a requirement as of FY 2015. However, compliance with the Children’s Internet Protection Act (CIPA) remains a requirement. Applicants must certify that schools and libraries receiving discounts on Internet Access, Internal Connections, and/or Basic Maintenance services are enforcing a policy of Internet safety that includes measures to block or filter Internet access for both minors and adults to certain visual depictions. As of FY 2012, the certification was expanded to include a requirement providing training to students about appropriate online behavior, including interacting with other individuals on social networking websites and in chat rooms, and cyber bullying awareness and response.

For consortia, the lead member is responsible for ensuring that necessary certifications are made and for responding to USAC inquiries on behalf of the consortium members. The consortium leader must collect from each consortium member a signed FCC Form 479, Certification by Administrative Authority to Billed Entity of Compliance with the Children’s Internet Protection Act, to establish that member’s status under CIPA. After all FCC Forms 479 have been collected, the consortium leader can complete the Form 486. The Form 479 is not required if the consortium requested funding only for telecommunications services. The consortium leader does not submit FCC Form 479s to USAC, but must retain them for its records for a period of ten years after the last day of service delivered for a particular year. This form may be requested during an audit or other review process.

USAC has updated its online Form 486 for FY 2015. A paper type-in version of the Form 486 is available in the E-Rate Central Forms Rack.

USAC Fall Applicant Training:

USAC announced the dates and locations of its fall E-rate applicant workshops last week. As in recent years, there will be eight regional one-day training sessions beginning Friday, October 2nd in Washington, DC. Registration is now open and attendance is building quickly. The full training schedule with registration links is as follows:

USAC Spring Service Provider Training:

This year’s spring USAC E-rate training, designed primarily for service providers, will be held in Phoenix on Tuesday, June 2nd, and in Tampa on Tuesday, June 16th. Both sessions are fully subscribed, but USAC is accepting waiting list registrations.

The S&L News Brief of May 22, 2015, discusses USAC procedures to contact applicants and service providers if more information is necessary to process a form. Applicants should respond promptly and fully to any reviewer requests. The News Brief notes that Problem Resolution and Program Integrity (“PIA”) review are the two most common situations where USAC needs more information and explains how USAC attempts outreach in each situation’s procedure for them.

USAC defines the summer break period as beginning the Friday before Memorial Day through the Friday after Labor Day, or for FY 2015 from May 22 (last Friday) through September 11, 2015. If USAC began an inquiry prior to May 22nd for an application, the clock is ticking and a timely response is required. Applicants should designate someone who has sufficient knowledge about their applications’ funding requests to answer questions in their absence.