Funding Status
The first funding wave for FY 2011 is expected later this month following FCC approval of USAC's PIA review procedures. Assuming no significant FCC changes, the SLD expects to fund approximately 18,000 Priority 1 applications in Wave 1.
Initial indications are that there will be another 0.9% upwards inflation adjustment to the basic E-rate funding cap for FY 2011. This would raise the cap to $2,290,682,250. With the addition of roll-over funds — currently estimated at $600 million for FY 2011 (and expected to be announced next month) — total available funds would be just under $3 billion. At this level, and given the SLD's preliminary demand estimate, we would expect that the Priority 2 funding threshold would be slightly below 90%. An 80% threshold looks unlikely.
No funding waves for either FY 2009 or FY 2010 are scheduled for this week.
PIA Review and Basic Maintenance
The first few months of the FY 2011 application window were difficult ones for applicants planning to apply for discounts on basic maintenance services. The FCC's 6th Report and Order (10-175), released last September, had made "unbundled warranties" ineligible. The basic concept was that the E-rate program would no longer pay for "insurance type" maintenance contracts under which applicants would be charged whether actual work was done or not.
While simple in concept, the FCC's ruling has proved difficult in practice. Many maintenance contracts (e.g., Cisco SMARTnet) include actual ongoing maintenance work plus a contingent allowance for additional break/fix work. Further, an earlier FCC Order had indicated that a technical support contract providing any service other than basic maintenance would be fully ineligible. If a contract included both basic and non-basic maintenance, the non-basic portion could not be allocated out - instead E-rate funding for the entire contract would be denied. With little initial guidance, applicants were rightly confused regarding how new maintenance contracts should be structured, much less how to deal with existing multi-year contracts.
As the FY 2011 application window drew to a close, the FCC provided some additional guidance on eligible maintenance components. More importantly, it gave USAC the flexibility to allocate out any type of service provided under maintenance contracts without invalidating the contracts entirely. It was not at all clear how this PIA review process was going to work, but at least applicants could file their basic maintenance applications with confidence, knowing that any ineligible portions could be allocated out during PIA review.
But now we're finding out. PIA review has started, and applicants are starting to receive questions on their maintenance contracts. Initial indications are that these requests are going to be subject to considerable scrutiny. Based on early PIA inquiries we've seen, applicants applying for basic maintenance should be prepared to answer the following types of questions:
- Please provide full vendor documentation for this request.
- Please provide a full list of equipment for this request including the per component cost for maintenance.
- Please provide in detail how the cost of maintenance was derived. This breakdown should include the cost of maintenance for each piece of equipment or the total hours of maintenance and the number of hours of maintenance for each individual piece of equipment and should reconcile to the total amount for 12 months of service.
- Please indicate the tasks that will be performed as basic maintenance under this agreement, and the cost or number of hours allocated per task.
- It is not clear whether travel charges are included in your basic maintenance request. If your request for basic maintenance includes travel charges please indicate the total cost of travel alone, the number of trips the vendor will be making to the entity, and indicate how the cost of travel was derived.
- Is any cabling maintenance included in this request? If so, please provide the cost of cabling maintenance.
E-Rate Updates and Reminders
SLD Service Provider and Applicant Training:
The SLD conducted a one-day training session for service providers in Los Angeles last week and will repeat the session in Atlanta this week. Training slides for these workshops are available on the SLD Web site. Two important points for applicants should be noted, namely:
- The Beneficiary Compliance Audit Program ("BCAP") is scheduled to begin 3Q11. It will be an ongoing program (i.e., no rounds), but reportedly will not overlap with the filing window. Unlike past audit programs, service providers will be notified of customer audits.
- One slide noted that tech plans must conform to FCC rules and to state or local requirements. This means that applicants subject to state tech plan requirements may be held accountable for having plans even if they are applying only for Priority 1 E-rate funds. However, note that: (a) it is not clear that the FCC's E-rate rules require separate compliance with state technology practices, and (b) many state requirements have been tied to NCLB/Title II-D funding that appears to be coming to an end.
The SLD has indicated that the fall schedule for applicant training will be posted in the Training Sessions section of its Web site later this week.
Incomplete Form 471 Reminders:
Applicants who had not yet certified their FY 2011 Form 471s or who may not have submitted their Item 21 attachments began receiving USAC reminder letters last week. The response deadline for replies, if required, is May 17th. If these certifications are not made or if attachments are not submitted for each FRN by the due date, those applications and/or FRNs will be treated as out-of-window and will not be funded.
The "Item 21 Attachment Urgent Reminder Letter" is causing some confusion among applicants, most of whom have already submitted their Item 21 attachments. Applicants wishing to confirm and/or document USAC receipt of their attachments should submit a query online using Submit a Question or by calling the Client Service Bureau (888-203-8100).
Additional information on these reminder letters is included in an earlier newsletter and the SLD's News Brief dated April 22.
Applicant Use of E-Rate Consultants:
This year, for the first time, the Form 471 application process required filers to list their consultants, if any. With most of the FY 2011 applications displayed online, it is now possible to estimate the prevalence of consultant use by E-rate applicants. Our preliminary analysis indicates that approximately 33% of the applications filed were associated with E-rate consultants. In terms of the dollar value of funds requested, the consultant share was approximately 54%. This suggests, as might be expected, that consultants are used more often for work on larger applications.
The SLD's News Brief for May 6, 2011, includes another reminder about the upcoming deadline for submitting Form 471 certifications and Item 21 attachments (see above). The News Brief outlines the basic information that should be included in the attachments, and provides instructions for submitting both certifications and attachments.