News of the Week

The SLD provided a detailed report to the FCC this week showing a breakdown of the funding requests included in applications received for PY4. As of the January 18^th deadline, the SLD received 37,188 applications requesting total discounts of $5.787 billion.

Although this demand figure may decline somewhat as the SLD uncovers duplicate or incomplete applications, the total is historically high for this stage in the application cycle. It is obviously well above the E-rate funding cap of $2.25 billion.

An analysis of the three major funding categories indicates that the demand for Priority One funds (telecommunications and Internet access) totals $1.824 billion (81% of the funding cap). This would leave just over $400 million for internal connections, a number that compares unfavorably with $1.7 billion in requests from 90% discount rate applicants. The SLD noted that, unless final demand declines significantly, this will be the first program year in which they will not be able to fully fund 90% discount requests, much less any internal connection requests at a lower discount level.

A copy of the SLD’s report to the FCC can be found on the SLD Web site.

• PY3 Appeals of Item 22 Rejections

The FCC issued an appeal decision this week that is expected to positively affect appeals involving PY3 applications rejected by the SLD for failure to meet Minimum Processing Standards ("MPS") concerning missing Item 22 data. (Item 22 is the section in the Block 5 funding request that references either the site-specific Entity Number or, for shared services, the Block 4 worksheet number.)

In this particular appeal, the FCC noted that:

1. a new Form 471 version was used for PY3 applications;
2. the proper discount rate could be easily discerned from other data provided; and
3. all other portions of the application were substantially complete. The FCC ruled that: "The administrative cost of accepting [this] application under these facts are minimal and are outweighed by the objective of ensuring that schools and libraries benefit…" from the E-rate program. As a result, the FCC instructed the SLD to reconsider the application and, more importantly, to similarly resolve comparable appeals dealing with PY3 rejections. The language of the decision also appears to give the SLD some latitude in dealing with similar MPS issues on PY4 applications.

While this may be good news for a number of applicants, several points should be noted.

1. The decision applies only to applicants whose Form 471s were rejected and who subsequently filed timely appeals. Rejected applicants who did not file appeals are not covered. This is another example of a subsequent pro-applicant decision that applies retroactively only to appeal situations. The clear lesson, as we have discussed before, is that applicants should appeal every adverse decision on which a reasonable argument can be made for reversal.
2. Not all PY3 applications, rejected for missing Item 22 data and appealed, will be funded upon reconsideration. Missing Item 22 data might not meet the FCC criteria and/or there may be other problems with an application.
3. The decision may not apply equally to rejected applications in PY4 if only because changes to the Form 471 this year were minor. Hopefully, however, the SLD will pay more attention to the FCC criteria on substantial Form completion, minimal administrative costs, and overall program objectives.