Outlook for Internal Connection Funding at 90% Level in PY4
Depending upon a final analysis of funding demand for PY4, a serious issue may arise concerning the funding of high discount requests for internal connection services. Preliminary SLD figures, released to the FCC at the end of February, indicate a demand for Priority One telecom and Internet services of over $1.8 billion. At this level, and with no expected increase in the total annual funding cap of $2.25 billion, less than $500 million would be available for Priority Two internal connection services. The SLD reports, however, that it has received internal connection requests of $1.7 billion from 90% discount rate applicants alone. Unless final demand drops, as some applications are reviewed and rejected, or unless additional program funding is approved, less than a third of the 90% requests can be funded.
Current rules suggest that, if a given discount rate band can not be funded in full, the available funds would be prorated. On this basis, needy applicants might only receive discounts of 20-30%. This raises questions as to whether funding at this level would be effective or whether other allocation mechanisms should be considered. We do not expect early resolution of this issue and, therefore, believe that internal connection requests will be addressed only towards the end of the funding cycle.
E-rate rules specify that cellular/PCS/paging services are eligible only if used for "educational purposes" and provided for use at a place of instruction. The SLD’s latest Eligibility Matrix lists cafeteria directors, maintenance personnel, and facilities directors as examples of ineligible users. In an appeal decision (DA 01-586) issued earlier this month, the FCC reiterated the conditions for eligible use and supported a broader list of ineligible users that included "resource officers," Crisis Team members, computer center employees, and food service/warehouse workers.
Applicants requesting discounts on mobile services are often asked by PIA reviewers to provide a list of the names and positions of all users. If a reviewer finds that discounts were improperly requested, with more than 30% of usage deemed ineligible, the entire funding request may be denied.
Applicants filing BEAR forms for funded mobile services should make sure that they claim reimbursements only for use by eligible users. If bills for both eligible and ineligible users are being discounted by the carrier (as may happen with Verizon Wireless), the applicant should advise the carrier to use an adjusted discount rate (equal to the nominal discount rate times the percentage of eligible use).
We have recently received clarification from the SLD that it is possible to receive discounts on services from two suppliers under a single funding request if suppliers are changed (e.g., switching long distance carriers) midway through a funding year. However, extreme care must be taken in filing BEAR forms and SPIN change requests to make this process work. In particular, there are two key considerations.
- A change of service provider must comply with the new "COPAN" criteria requiring that (i) the SPIN change be allowed under state and local procurement rules, (ii) the SPIN change be allowable under the terms of the contract between the applicant and its original service provider, and (iii) the applicant has notified its original service provider of its intent to change service providers.
- Reimbursement timing is critical. For BEAR form reimbursement (or supplier invoice) processing, only one supplier can be associated with a given funding request ("FRN") at a time. Thus, a SPIN change request should not be made until all discounts attributable to the original supplier have been approved.
As an example, consider the case of an applicant who was originally funded for long distance services from Carrier A and who used that carrier for six months. Effective January 1, the applicant switched to Carrier B. To receive six months of discounts from each carrier, the applicant should do the following:
- Wait until a final bill is received from Carrier A, probably in January, then file a BEAR form for discounts on services received from July to December;
- After the BEAR is approved, and the Carrier A is paid by SLD, file a SPIN Change Request (with appropriate COPAN certifications); then
- In July or later, after the SPIN change is approved, file a BEAR form for discounts on Carrier B’s services received from January to June.