New CEO for USAC:
USAC nominated, and FCC Chairman Pai approved, the appointment of Radha Sekar as the Chief Executive Officer of USAC. USAC’s previous CEO, Chris Henderson, had abruptly resigned last May; Vickie Robinson has been serving as Acting CEO in the interim. Ms. Sekar has a background in technology and finance, most recently with the Farm Services Agency. Chairman Pai’s letter to the USAC Board, referenced above, notes that Ms. Sekar’s nomination was made “in large part because of her extensive experience leading organizations facing information technology challenges.”
Upcoming 2017 E-Rate Dates:
| December 18 |
Form 486 deadline for FY 2017 funding committed in Wave 12. Upcoming FY 2017 Form 486 deadlines include:
Wave 13 12/26/2017
Wave 14 01/02/2018
Wave 15 01/08/2018
Wave 16 01/15/2018
Applicants missing these (or earlier) deadlines should watch carefully for “Form 486 Urgent Reminder Letters” in EPC. The Reminders will afford applicants with 15-day extensions to submit their Form 486s without penalty.
|
| January 10 |
Close of the EPC Administrative Window. As of 11:59 p.m. EST, EPC entity profiles will be locked. Applicants will not be able to update their profiles (e.g., with student NSLP data) until after the close of the Form 471 Application Window. |
| January 11 |
The FY 2018 Application Window opens at 12:00 noon EST. The Form 471 Window will close at 11:59 p.m. EDT on March 22, 2018. |
FCC Decision Watch – Net Neutrality and Funds Recovery:
The FCC issued three orders last week that, if not directly related, may have educational and/or E-rate implications.
Net Neutrality:
The most important — and most controversial — was the FCC’s adoption of an Order ending net neutrality protections. We expect the full Order to be published shortly. The previous net neutrality rules were put in place less than two years ago under the Democratic-controlled FCC. Those rules placed Internet service providers (“ISPs”) under more strict Title II regulations and, more specifically, required ISPs to treat all Internet content equally. The new Order essentially restores the pre-2015 regulatory framework, eliminating Title II regulations and relying more fully on market forces (with oversight by the Federal Trade Commission).
Strong — indeed strident — arguments were made on both sides of the issue. The FCC received a record 24 million comments on the topic — not to mention those of the Commissioners themselves — warning of dire consequences if net neutrality was or was not eliminated. Generally, the educational community opposed the change. CoSN (the Consortium for School Networking), for example, argued that “Absent the net neutrality guardrails, school systems will now face a bleak reality: reduced choices, higher prices and fewer innovative tools.” Given that the net neutrality rules had only been in place for two years, and that carriers servicing schools and libraries are bound by additional Lowest Corresponding Price (“LCP”) E-rate provisions, these fears may be overstated.
Our concern is more political. The level of discord among the Commissioners — leading to a vote along strictly party lines — was beyond historic precedent. The entire process, as expressly noted by one Commissioner was “ugly.” Our hope is that future decisions on E-rate will not be driven by the same rancor.
Funds Recovery:
The FCC issued two decisions last week to recover funds disbursed well in the past. In both cases, as it has done consistently, the FCC rejected any notion of a statute of limitations in such proceedings.
The recovery period in the one E-rate decision (DA 17-1206) was the longest we’ve ever seen. It traced back to FY 1998, the first year of the program, after USAC subsequently found that the applicant, a school serving students with disabilities, had been improperly funded for internal connections in dormitory facilities. In reaching its decisions, the FCC not only reiterated its position that USAC is not time-barred from recovering funds, but it rejected an argument for retroactivity in that services to similar residential buildings are now deemed eligible under the FCC’s Sixth Report and Order (FCC 10-175).
The second decision (FCC 17-162) similarly rejected an appeal for a longstanding violation, but involved the high-cost, not E-rate, program. It did, however, have two E-rate worthy aspects.
- A separate statement by Commissioner O’Rielly supported the decision, in part because “the misconduct was egregious.” Nevertheless — with apparent reference to a recent rash of old funding year E-rate recovery actions — Commissioner O’Rielly expressed sympathy for affected applicants, stating:
At the same time, I have heard complaints that USAC has been attempting to recoup certain overpayments from a decade ago that reportedly resulted from ministerial errors rather than fraud - the type of situation where the steps to obtain recovery at this point may cost more than the funding at stake. Moreover, recipients that obtained funding that long ago may not have been under an obligation to retain records for that length of time, relevant personnel may no longer be found, and rules now in place may not have been applicable that far back in the past. Make no mistake: I abhor any waste, fraud or abuse caused by wrongdoers and fully support the recoupment of such funds. However, I am sympathetic to the view that the Commission generally should be required to recover funding within a defined timeframe, such as 7 years. Certain timing limitations imposed on the Commission, like those that exist in other areas, would not wholly prevent the exercise of oversight or imposition of enforcement actions when needed. To the extent that would require clarification or direction by Congress, that could be a welcome improvement.
- The decision also contained an implicit warning about the importance of filing fully-supported appeals, waivers, and petitions for reconsideration within the prescribed 30- or 60-day filing windows. We have occasionally seen E-rate applicants, running up against the appeal window deadline, filing a barebones appeal on time, then supplementing the initial filing in more detail later. In this case, the appellant had filed four supplements well after the window. The FCC rejected two of them stressing that “strict enforcement of filing deadlines is ‘both necessary and desirable’ to avert the ‘grave danger of the staff being overwhelmed by a seemingly never-ending flow of pleadings.’” The footnote further indicated that “The D.C. Circuit Court of Appeals has also generally discouraged the Commission from accepting late petitions in the absence of extremely unusual circumstances.”
California Wildfire Request:
The FCC issued a Public Notice (DA 17-1192) seeking comment on a request submitted by the California Department of Education request for waiver of certain E-rate rules and program requirements for schools affected by the State’s extensive wildfires. Comments are due January 11th; reply comments are due January 26th.
Proposed USF Contribution Factor for 1Q18:
In another action, the FCC issued a Public Notice (DA 17-1203) announcing the proposed Universal Service Contribution Factor of 19.5% for the first calendar quarter of 2018. The quarterly contribution factor represents the percentage of interstate and international telecommunications revenues to be paid by carriers and other contributors into the Universal Service Fund (“USF”). The higher the percentage goes, the more politically sensitive becomes USF funding and the underlying programs, including E-rate. Next quarter’s rate of 19.5%, up from 16.7% a year ago, is uncomfortably close to a landmark setting 20%.
The percentage rate is driven not only by the numerator, USF program expenses, which are increasingly subject to FCC caps, but by the denominator, telecom revenues, which have been falling. The FCC has had a proceeding underway for over five years to consider new sources of contributions, but has made little progress on coming up with a long-term solution to this problem.
USF Funds Transfer to the Treasury:
Recipients of USF funds, including BEAR reimbursements for E-rate applicants and SPI payments for service providers, are beginning to receive emails from USAC with the following message:
The move to transfer USF funds, currently held in commercial banks, to the U.S. Treasury is being made, in part, on the recommendation of OMB. It is expected to take place next April. Once the transfer is made, electronic transfers to the recipients will henceforth come from the Treasury. This may require some recipients to update “originator” codes in their bank accounts, but should otherwise be transparent. As indicated in the emails, additional information will be provided next year.
E-Rate Training Material:
USAC’s annual fall training sessions were held this year in Charlotte, Minneapolis, Portland, and Washington DC. Presentation slides for these training sessions are available online. USAC also did a webinar last week entitled “Applicant Training Highlights.” Other useful instructional videos and webinar recordings may be found in USAC’s Online Learning Library.