News of the Week

January

• The SLD clarified that the ineligibility of "unbundled warranties" in the Eligible Services List ("ESL") for FY 2010 did not mean that SMARTnet-type contracts were inherently ineligible, but rather that "duplicative" contracts for basic maintenance would not be funded. Significantly, however, the ineligibility of "unbundled warranties" in the FY 2011 ESL was defined differently (see entry for December 2010).

February

• The FCC received comments on proposed revisions to the newly proposed CIPA rules designed, in large part, to include the educational component requirement of The Protecting Children in the 21st century Act. Reply comments were due in March. As of yearend 2010, the FCC had not released a revised CIPA Order.
• The FCC approved an Order and NPRM (FCC 10-33) permitting community use of school Internet facilities during non-school hours. The initial community use waiver, effective through June 30, 20l1, was subsequently made permanent under the new E-rate rules released in September 2010.

March

• The FCC released its National Broadband Plan to Congress. The Plan included: (a) a specific option "...to remove barriers to off-hours community use of E-rate funded resources;" and (b) broadband adoption options to facilitate public-private partnerships and to develop digital literacy standards and support.

May

• The FCC released a major NPRM seeking comments on a broad spectrum of proposed changes to the E-rate program (FCC 10-83).

June

• For the second year in a row, the FCC approved the roll-over of $900 million of previously unused funds into the current funding year. Hopefully, this will ultimately permit USAC to fund Priority 2 requests for FY 2010 down to at least 80% (the current threshold is 81%).

July

• The FCC released an appeal order (FCC 10-122) on over 250 requests for waivers of the Form 471 application window for prior years. For the most part, the FCC approved waivers for those missing the deadlines by 14 days or less, but denied later filings when the petitioners were unable to strictly justify "special circumstances" justifying waivers.

August

• The FCC issued two orders (FCC 10-138 and FCC 10-143) regarding FOIA requests to USAC. Most importantly, the FCC noted that USAC, while not a federal agency, administers the E-rate program on behalf of the FCC and is thus subject to the same FOIA exemptions as a federal agency. In October, the Supreme Court agreed to consider the issue.
• USAC initiated a new Payment Quality Assurance ("PQA") program to collect disbursement data as required by the Improper Payments Information Act ("IPIA"). The program provided for the off-site review of actual E-rate invoice payments (approximately 60/month).
• As of August 31st, all USAC payments to service providers were required to be electronic. The requirement applies to both SPI and BEAR payments.

September

• The FCC approved its Sixth Report and Order (FCC 10-175) making extensive changes to the FCC rules. For the most part effective beginning FY 2011, the new rules included:
  • The eligibility of both dark and lit fiber provided by any type of service provider.
  • The elimination of the technology plan requirement for Priority 1 services.
  • Codification of procurement rules, including "gifts," to assure fair and open bidding processes.
  • The indexing of the E-rate annual funding cap to inflation (resulting in an increase in FY 2010 funding by over $20 million).
  • Stricter criteria for the approval of operational SPIN changes.
  • A $10 million pilot program ("EDU2011") to support off-campus use of wireless Internet services for schools and libraries.
  • The FY 2011 ESL retaining the eligibility of Web hosting but making product insurance-type bundled warranties and fixed price maintenance contracts ineligible.
• The SLD began its annual fall applicant training workshops, unable to answer many questions pending further FCC clarification on the new rules.

October

• OMB approved new versions of Form 470 and Form 471 for use beginning FY 2011.

November

• Reports surfaced of USAC inquiries to selected service providers who had experienced recent success, as measured by total funding requests, in obtaining E-rate contracts. Pending results of the inquiries, associated applications were being held.
• The GAO released a report to Congress (GAO-10-908) calling on the FCC to conduct a thorough review of E-rate's internal control structure (including risk assessment).

December

• The FCC released two orders seeking to clarify a number of the many unresolved issues arising from the new E-rate rules. DA 10-2355 provided additional information on the ineligibility of bundled warranties and on the gift and donation rules. DA 10-2356 included FAQs on community use, dark fiber, SPIN changes, and technology plans, and provided a table of effective dates for various components of the new rules.
• The FCC received approximately 90 applications for the EDU2011 pilot program.

Anticipated E-Rate Developments in 2011:

January

• USAC online versions of the new Form 470 and Form 471 are anticipated to become available on or about January 11th. System implementation of the new versions resulted in a delayed application window for FY 2011 now scheduled to open January 11th and close March 24th.

February — March

• Ongoing clarifications are expected concerning various aspects of the new E-rate rules. Hopefully, many of these clarifications will be available before the close of the FY 2011 application window.

April — May

• Another round of on-site E-rate audits is expected to begin after the close of the FY 2011 application window. Audits this year are expected to be fewer in number (100-110) and more targeted in nature than the burdensome "attestation" audits in 2007, 2008, and 2009.
• USAC is required to submit a draft of the FY 2012 ESL to the FCC by the end of March. The FCC should release it for public comment shortly thereafter, several months in advance of the prior-year schedules.

Late spring — early summer

• The FCC should release revised CIPA rules requiring schools to certify that their Internet Safety Policies now include a component dealing with the education of students with regard to online safety. This is likely to require a revision to the Form 486 for FY 2011 use.
• The FCC will announce the amount of extra funds that will be rolled over into FY 2011. We expect next year's roll-over to be less than the extra $900 million that was made available for both FY 2009 and FY 2010. This will likely mean that Priority 2 funding for FY 2011 will not reach 80%.