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May 26, 2014

Introduction

The E-Rate Central News for the Week is prepared by E-Rate Central. E-Rate Central specializes in providing consulting, compliance, and forms processing services to E-rate applicants. To learn more about our services, please contact us by phone (516-801-7804), fax (516-801-7810), or through our Contact Us web form. Additional E-rate information is located on the E-Rate Central website.

 

For FY 2014, USAC will release Wave 3 Funding Commitment Decision Letters (FCDLs) Thursday, May 29th. This wave includes commitments for approved Priority 1 (Telecommunications Services and Internet Access) requests at all discount levels. As of May 23rd, FY2014 commitments total over $750 million.

For FY 2012, USAC will release Wave 86 FCDLs May 30th. This wave includes commitments for approved Priority 2 (Internal Connections and Basic Maintenance) requests at 90 percent and denials at 89 percent and below. As of May 23, FY 2012 commitments total over $2.86 billion.

Friday, May 23rd, 2014 the FCC released a “Cost Allocation of Bundled Services” Order (DA 14-712, “CA Order”) that revises their prior 2010 Clarification Order regarding cost allocation of bundled services in the E-rate Program. Beginning with the upcoming FY 2015, the Commission will again require E-rate recipients to cost allocate ineligible components that are bundled with eligible products or services, even under the limited circumstances previously allowed under the the 2010 Clarification Order.  E-rate applicants must deduct the value of all ineligible components bundled with eligible services unless those ineligible components qualify as “ancillary” to the eligible services under the Commission’s rules.

The 2010 Clarification Order produced varying understandings of what could, or could not, be bundled, e.g. some providers began offering free handsets to E-rate and other customers that purchase VoIP (Voice over Internet Protocol) services.  E-Rate Central’s weekly newsletter (December 3, 2012) carried several articles about this issue.  Both E-rate applicants and service providers sought further clarity on the scope of the guidance that the FCC had provided.

The new Order explains that the State E-rate Coordinators Alliance (SECA) filed a petition seeking clarification on whether certain end-user devices could be purchased in bundles without cost allocation. This was followed an FCC Public Notice seeking comment on the SECA Petition, again receiving significant volume of comments.  As the CA Order notes, confusion continued “...over the interplay between that order [2010 Clarification Order] and the Commission’s cost allocation rules,” with many commenters expressing frustration at the continued lack of clarity for products and services other than cell phones that did, or did not, require cost allocation.

In this new Order the Commission makes a clear and firm statement that the prior cost allocation guidance is overturned (at para. 9):

Rescinding the cost allocation guidance of the 2010 Clarification Order and once again requiring cost allocation of all non-ancillary ineligible components of a bundle reflects the best reading of Commission rules and will make it easier for applicants to determine what must be cost allocated.

The CA Order concludes that “Requiring cost allocation for all bundled ineligible components, including cell phones, comports more fully with Commission rules” (at para. 10).  The Order references numerous times that applicants must be careful to separate out and deduct ineligible components from their funding requests when they seek discounts for purchases of bundled services.  Particular emphasis is made that applicants must be clear and forthright in cases where ineligible components, that are deemed as ancillary to eligible services, are indeed, truly ancillary under the E-rate program’s definition.

One implication of the new Order is that applicants, who have signed multi-year contracts for VoIP services with bundled handsets, will have to cost allocate out a portion of the monthly costs attributable to those handsets beginning with next year.  However, depending upon FCC E-rate modernization decisions expected later this summer, this issue may become moot if and when the FCC eliminates or phases out the eligibility of certain “legacy” services. 

Application Review and Response:

All applications go through an initial review and a final review which may include questions from Program Integrity Assurance (PIA) reviewers for many applications on specific topics. Applicants are expected to respond in a timely manner to inquiries from PIA reviewers at USAC who check the information on the Form 471s for completeness and accuracy and who may require additional information.  Applicants have 15 days to respond to PIA questions; however, time extensions to prepare the response may be requested, keeping in mind that this will add more time to the review process.  If the applicant does not respond by the specified due date, there is a risk of funding denial.

Form 471 Certifications and Item 21 Attachment Submittals:

Tuesday, May 27th is the last day to submit certifications for timely filed FY 2014 Forms 471 and  Item 21 attachments. Forms 471 can be certified online or on paper; Item 21 attachments can be submitted online, by mail, by fax at 973-599-6511 or on paper.

The SLD News Brief for May 23, 2014 reminds applicants of USAC’s procedures to contact applicants and service providers if more information is needed to process a form.  The News Brief notes two of the most common situations where USAC needs more information: incomplete or missing data on a form, or more information is needed from an applicant to complete the review of an application.  Since schools may be closed for periods of time, such as the summer break, many applicants may not be available.  Applicants are advised to communicate with USAC regarding their availability and preferred mode of contact for responding to missing data and PIA inquiries.  USAC’s summer contact period is defined as the Friday before Memorial Day through the Friday after Labor Day.  For 2014, the dates of the summer contact period are May 23rd  through September 5th.