News of the Week

The FY 2014 application window will close on Wednesday, March 26, 2014 at 11:59 p.m. EDT. On Friday, the FCC formally approved USAC’s PIA Form 471 review procedures for FY 2014, and we are already seeing PIA outreach on applications submitted to date. Interestingly, the FCC's approval was made “subject to further modifications and/or instruction from the Commission with regard to the prioritization of the FCC Form 471 applications” — perhaps, as previously suggested, to prioritize the review of broadband consortium applications.

Wave 42 for FY 2013 will be released on Wednesday, March 12, 2014. Funding for FY 2013 is available for Priority 1 services only. Cumulative funding for FY 2013 is $1.95 billion.

Wave 80 for FY 2012 will be released on Thursday, March 13, 2014. Priority 2 funding is being provided at the 90% discount level only. Cumulative funding for FY 2012 is $2.85 billion.

The FCC’s Public Notice on E-rate modernization (DA 14-308) was released for public comment last Thursday. Comments are due April 7th and reply comments are due April 21st. This is a relatively short comment cycle, in part because this Public Notice (“PN”) can be viewed as an extension of the broader E-Rate 2.0 NPRM released last July, and in part because the FCC is aiming to issue an order on E-rate modernization before the start of the next school year with new rules to become effective as of FY 2015.

Paragraph 3 of the PN provides the following overview:

Based on the extensive input the Commission has received, it appears that meeting the Commission’s proposed goals for the E-rate program will require that, in the near term, the program focus on providing the support necessary to ensure schools and libraries can afford high-speed connectivity to and within schools and libraries, even as the Commission develops a long-term approach that allows applicants to scale up capacity while driving down costs. More specifically, the record underscores the importance of providing consistent and broadly available support for the equipment and services needed to enable high-capacity wireless broadband within schools and libraries; greater support, at least in the short term, for last-mile deployments needed to connect schools and libraries that do not currently have access to high-speed connections; a support methodology that allows applicants to capture the long-term cost-efficiencies associated with access to scalable, high-speed connections; less support for voice services, as the cost of voice services transition in the long run to the marginal cost of packet-based voice services provided over high-capacity broadband connections; incentives for making cost-effective purchasing decisions, including incentives and opportunities for schools and libraries to benefit from economies of scale in purchasing supported services; and as much administrative simplicity as possible, while protecting against waste, fraud and abuse.

The three most critical proposals, as we see them, are:

1. Replace the current two-priority system with a new two-category system, each separately funded.
2. Within each category, emphasize broadband funding and phase out support for voice and other “legacy” services.
3. Add in an additional $2 billion in funding for FY 2015 and FY 2016.

Before discussing the PN in more detail, three disclaimers should be noted. The first is that the order targeted for release later this year is likely to be only the first step in the E-Rate 2.0 modernization process. That is a key reason that this PN has a much narrower focus than last summer’s NPRM. As but one measure, this PN raises only 110 questions as compared with the 616 questions in the earlier NPRM.

The second disclaimer, made by the FCC itself, is that: “The issues we raise in this Public Notice do not define the full universe of possible changes the Commission could make in an order modernizing the E-rate program.”  Our interpretation of this statement is that the FCC may feel that it has already received sufficient comments on certain issues from last year’s NPRM and that the issues did not need to be more fully explored in this Notice.

The final disclaimer is that the FCC may not be speaking as a single voice on this modernization effort. Commissioner Ajit Pai took the relatively unusual step of releasing a public statement criticizing the Public Notice. Dissension among the Commissioners may slow and/or change the direction of the E-rate reform process.

Focused Funding for High-Capacity Broadband:

As expected, the PN’s primary focus is on changing the E-rate program to concentrate funding on broadband all the way to the classroom. It proposes to do that by shifting priorities within the existing E-rate funding model and by freeing up an additional $2 billion in USF funds on a one-time basis to support broadband deployment over the next two years.

Reading between the lines a bit, what the FCC proposes to do is to replace the current two-priority system, under which Priority 2 receives funding only to the extent such funding is not needed in Priority 1, with a new two-category system — each apparently separately funded.

One category would be for telecommunications and Internet services — essentially for what we currently refer to as Priority 1. The second category would be for intra-building LAN and WiFi networks — essentially a subset of what we have been referring to as Priority 2 equipment. Since the FCC is considering “allocating annually a set amount of E-rate funds” for such equipment, it may be useful to start referring to these as “Category 1” and “Category 2” (unless or until the FCC comes up with more formal names) instead of “Priority 1” and “Priority 2.”

If Category 1 and Category 2 are funded separately, a potential problem arises. What happens if there is not enough money in one or both categories to fund all requests in a given year?  As stated in one early reaction to the proposal, “this is akin to shuffling the deck chairs.”  The likely solution, at least for a few years, involves one or more of the following possible approaches included in the PN:

1. As mentioned above, increase E-rate funding by a total of $2 billion over the next two years.
2. Eliminate or phase-out the eligibility of non-broadband services currently covered by E-rate (so-called “legacy” services). The PN discusses and/or seeks comments on the following options:
   1. In Category 1, phase-out voice services, possibly defined broadly to include “interconnected VoIP, telephone services such as local, long distance, cellular, and Centrex service, and telephone components such as text messaging and directory assistance charges.”  No mention is made of the continued eligibility of e-mail and web hosting.
   2. In Category 2, include “only equipment and supporting software that is essential to getting high-capacity broadband from the building’s front door to the computer, tablet, or other learning devices…”  No mention is made of the continued eligibility of equipment maintenance.
3. Explore alternative methods to allocate Category 2 funding, possibly including:
   1. A “five-year upgrade cycle” permitting funding once every five years (i.e., replacing the 2-in-5 rule with a 1-in-5 rule).
   2. Rotating the availability of funding to permit all applicants, regardless of discount rate, to get funding at some point over time.
   3. An annual allocation of available funding to all applicants based on student counts and/or buildings.

Demonstration Projects:

As least some of the additional $2 billion is expected to be used to provide “limited funding for well-defined, time-limited demonstration projects aimed at identifying and testing different approaches to meeting schools’ and libraries’ connectivity needs.”  Alternatives mentioned include:

1. Experiments in bulk purchasing;
2. Technical assistance programs, possibly involving public-private partnerships; and
3. “Last-mile” infrastructure pilots linking to BTOP-funded networks.

Future newsletters will address these Public Notice issues, options, and received comments in greater detail.

“Form 470 But No Form 471” Notifications:

Last week, as it has done in the past, a week or two after the last day to submit a valid Form 470 for the upcoming funding year (February 26th for FY 2014), USAC began bombarding applicants with “Form 470 but No Form 471” e-mail notifications. If you get one of the notices — and 25 thousand or more do each year — do not panic!

In what we believe is a confusing practice (perhaps misinterpreting FCC guidance) these notifications are sent to all applicants who filed Form 470s, but who have not yet filed Form 471s, reminding them of the upcoming application filing deadline. Unless read carefully and understood, these letters may make applicants believe that they are about to miss — or perhaps have already missed — a critical deadline. In truth, many applicants receiving these notices cannot yet properly file their Form 471s, even if they wanted to, because their Form 470s have not yet been posted for the required 28 days. While we encourage applicants to file their Form 471s as early in the window as possible, it is critically important that these applications not be filed until their Form 470s have been posted for at least those 28 days.

Form 486 Deadlines:

Typically, a Form 486 must be filed no later than 120 days from FCDL issuance or the start of service, whichever is later. Assuming services started July 1, 2013, the deadlines for FY 2013 funding waves 1-25 have already passed. The Form 486 deadlines for the remainder of March are:

            Wave 26          03/14/2014
            Wave 27          03/20/2014
            Wave 28          03/27/2014

SECA Comments on FCC Process Reform:

The State E-Rate Coordinators’ Alliance (“SECA”) filed comments last week with regard to the FCC’s Report on FCC Process Reform (see Public Notice and our newsletter of February 24, 2014).

The FCC’s report contains 150 recommendations for internal reforms. SECA’s comments focus primarily on:

1. The need to provide additional authority to USAC to waive or resolve deadline issues if the FCC adopts the recommendation to require all E-rate appeals to be submitted first to USAC;
2. The possibility of establishing a permanent E-rate stakeholder advisory group to work with USAC and/or the FCC; and
3. The need for greater transparency and due process on pending E-rate appeals and investigations. On this point, SECA reintroduced its white paper filed with the FCC in 2011 entitled “Black Holes and COMADS: Issues and Recommendations.”

The comment period deadline on this proceeding is March 31, 2014. There is no reply comment period.

ConnectEDucators:

President Obama’s 2015 budget, as proposed, would restore some funding specifically earmarked for technology. It includes $200 million in tech-focused competitive and formula grants in a program called “ConnectEDucators.”  By its name, this proposal suggests a close tie-in with the President’s ConnectED broadband initiative.

Other proposed educational funding includes:

• An additional $300 million for teacher professional development under the “Opportunity, Growth, and Security Initiative.”
• $150 million for a new program focused on "providing students challenging, relevant learning experiences" that will help boost their readiness for colleges and careers through partnerships with colleges, universities and businesses.
• $300 million for a new “Race to the Top for Equity and Opportunity” competition designed to improve achievement for high-needs students.
• Support for a “Preschool for All” initiative "to provide all low- and moderate-income 4-year-olds with access to high-quality preschool, while encouraging [s]tates to expand those programs to reach additional children from middle-class families and establish full-day kindergarten policies."
• “Early Head Start-Child Care Partnerships.”

Warning on the SLD’s Search Commitment Tool:

The SLD’s Search Commitments tool, showing applicant funding by year and wave, now includes the following warning:

This tool features information on commitments for individual applicants under the E-rate Program organized by funding year and funding wave. It is not intended to be used to aggregate data at the state, regional or national levels, as it will overstate those totals.

If you are interested in state, regional, or national information and statistics, you should use the Data Retrieval Tool.

The reason for this warning is that the funding data provided by this tool is organized by Congressional district.  If an applicant is reported to be located in two districts, its funding, as reported in this tool, is duplicated.  This problem became more pronounced last week when the SLD updated its Congressional district boundaries.  As an example, actual FY 2013 funding, as reported in the SLD's latest News Brief is $1.95 billion; total FY 2013 funding, as shown in the Search Commitments tool, is incorrectly listed at $2.55 billion (including duplications).

Individual applicant funding, when duplicated, is displayed in the Search Commitments tool in pairs as shown in the example below.

As indicated in the warning, funding data reflected in the SLD’s Data Retrieval Tool is correct. Year-by-year state and national totals can be found on our State Information pages. Individual applicant funding can be found using our Funding Quick Search tool on each state page.

The SLD News Brief for March 7, 2014 reviews the “Form 470 but No Form 471” e-mail notifications mentioned above, and focuses on a number of reminders for filing Form 471 applications for FY 2014, including:

• General reminders — most importantly, avoiding putting both Priority 1 and Priority 2 requests on the same application.
• Deadlines — most importantly, the 28-day Form 470 posting requirement and the March 26th close of Form 471 filing window.
• Form 471 Block 1 — FCC Registration Numbers.
• Form 471 Block 4 — new entity numbers and NCES/FSCS codes.
• Form 471 Block 5 — new Item 24 data circuit information required.
• Form 471 Block 6 — Item 26d requirement for total technology budget.
• Item 21 Attachments — importance of clicking “Submit” for online attachments.

Item 21 Attachments — importance of clicking “Submit” for online attachments.