Funding Status
This will be a busy E-rate funding week with waves being issued for FY 2009, FY 2010, and FY 2011.
Wave 2 for FY 2011 will be released on Tuesday, June 28th, for $58 million. This will raise cumulative funding for FY 2011 to $455 million. Only Priority 1 applications are being funded at this time.
Wave 55 for FY 2010 will be released on Wednesday, June 29th, for $5.95 million. Cumulative funding for FY 2010 will now be $2.57 billion. Priority 2 funding is still being awarded at 81% and above, and denied at 79% and below. The status of Priority 2 funding at 80% is pending an FCC decision.
Wave 88 for FY 2009 will be released on Monday, June 27th, for $6.82 million. Cumulative funding for FY 2009 will be $2.86 billion. The Priority 2 funding threshold for FY 2009 is 77%.
Draft of the Eligible Services List for FY 2012
On Friday, the FCC released a draft of the FY 2012 Eligible Services List ("ESL") for public comment (DA 11-1096). As indicated in the FCC's Public Notice, the proposed ESL includes the following extensive list of changes — largely clarifying in nature:
- updated the ESL introduction to indicate that E-rate funds are allocated in accordance with rules of priority, per Commission rules.
- clarified the ESL introduction to remind applicants that any telecommunications service is eligible for E-rate funding, however, for the remaining funding categories, funding is limited to those products and services that are specifically listed in the ESL.
- updated the ESL introduction to note that the services funded under the "Learning on the Go" program satisfy the requirement that services must be used for an "educational purpose."
- removed the explanation for including interconnected voice over Internet protocol ("interconnected VoIP") in the ESL because interconnected VoIP was affirmatively added to the list in accordance with a December 2009, Commission order.
- deleted the entry for "Other Eligible Telecommunications Services" and moved the information therein to appropriate sections of the Telecommunications Services category.
- updated the entry for dark and lit fiber service in the Telecommunications category based on the Sixth Report and Order and a subsequent public notice providing additional guidance.
- clarified the introduction of the Internet Access category by replacing and updating the description of eligible Internet access service with the definition of Internet access from the Commission's rules.
- deleted the entry for "Distance Learning and Video Conferencing" from the Internet Access category and moved the descriptions listed therein to the entry for "Internet Access."
- deleted the words "Internet-based" before the word "e-mail" in the entry for "E-mail Service" to conform to the definition of Internet access in section 54.5 of the Commission's rules.
- clarified that satellite service is one of the access technologies that could provide eligible Internet access.
- clarified that firewall services may not be provided by a vendor other than the Internet access provider and may not be priced out separately.
- clarified that mobile hotspot service designed for portable electronics is a type of eligible Internet access service if used for educational purposes, if off-campus use is cost-allocated, and when service is not duplicative of other wireless Internet access service.
- changed the name of the "Other Eligible Internet Access Services" entry to "Internet-Related Services" because the services listed in this entry do not, on their own, provide basic conduit access to the Internet.
- clarified the "Internet-Related Services" entry to explain that lit or dark fiber can be requested as a priority one service in the Internet access category.
- clarified the web hosting description in the "Internet-Related Services" entry to assist applicants in understanding the eligible portion of a web hosting service.
- revised the description of web hosting services that are not eligible for E-rate discounts and moved this description to the entry for Internet Access services that are not eligible.
- clarified that password protected pages are not eligible for E-rate discounts if they are established exclusively for use by librarians, administrators, school officials or teachers.
- clarified that firewall components are eligible in the "Data Protection" and "Servers" entries in the Internal Connections category.
- clarified the descriptions for software that is not eligible for discounts.
- moved the statement regarding the ineligibility of certain kinds of antennas to the entry for Internal Connections components that are not eligible.
- clarified the restrictions on remote access to homes or other non-school or non-library sites for residential schools that serve unique populations as explained in the Sixth Report and Order.
- added smartphones and tablets as examples of end-user equipment that is not eligible for E-rate discounts.
- revised the introduction to the Basic Maintenance of Internal Connections ("BMIC") category and the entry for Basic Maintenance of Internal Connections that is not eligible to conform with the Chicago Order, in which the Commission determined that technical support contracts may be cost-allocated, and clarified that applicants that seek on-site technical service must present USAC with sufficient evidence that, for their specific situation, on-site service is more cost-effective than off-site service.
- revised the "Maintenance and Technical Support of Internal Connections" entry for the BMIC category to conform to the Sixth Report and Order requirement that BMIC be reimbursed based on actual work performed.
- clarified the entry for the Miscellaneous category that "Miscellaneous" services and products related to services requested in the Telecommunications category should be requested (via FCC Form 471) in the Telecommunications Services or Internet Access category, depending upon the nature of the service provider.
- clarified the entry for "Miscellaneous Fees and Charges" that contingency fees will be reimbursed based on actual work performed.
- clarified the language in the Miscellaneous category to show that a technology plan is not required for priority one services such as T-1 lines and dark fiber; also included dark fiber as another example of a service that is not duplicative when it is appropriate for the population served and the services to be received, and provides the necessary bandwidth requirements for a school or library's technology needs.
- consolidated all of the special eligibility conditions pertaining to wide area networks into one entry.
- added definitions to the glossary for terms that were already in the ESL but had not been defined in prior years such as "failover" and "enhanced multimedia interface."
Comments on the ESL draft are due July 15th; reply comments are due July 25th.
The Growing Importance of Documentation
The E-rate program has always had strict record retention rules. Generally, applicants have been advised to retain all related E-rate documentation — technology plans, competitive bidding records, inventories of E-rate funded equipment, invoices, etc. — for at least five years after the last date to receive service. In reality, the "five years" is a bit misleading. Since most planning and bidding for services normally takes place two years before the last date to receive service, the actual retention requirement is usually at least seven years (and longer in the case of multi-year contracts).
Historically, however, only a subset of applicants (and/or service providers), subject to an audit or other special review, has run afoul of E-rate's documentation rules. This is about to change. Beginning with FY 2011, many more applicants may be asked to produce documentation — particularly with regard to competitive bidding and maintenance. Two appeal actions last week — an FCC decision and a newly-filed FCC appeal — highlight these two documentation issues.
Competitive Bidding Documentation:
The FCC issued an appeal decision in the case of Central Islip Free Union School District, et al (DA 11-1087) granting one appeal of a competitive bidding requirement violation, but denying five others. Of these, three were denied because the applicants could not produce complete (and/or non-conflicting) documentation on their competitive bid assessments.
The reason competitive bid assessment documentation becomes particularly important beginning in FY 2011 is that the FCC has dramatically tightened the rules for granting SPIN changes. Under the Sixth Report and Order, operational SPIN changes will be permitted only if: "(1) there is a legitimate reason to change providers (e.g., breach of contract or the service provider is unable to perform); and (2) the newly selected service provider received the next highest point value in the original bid evaluation, assuming there was more than one bidder." We fully expect that USAC's procedures for approving SPIN changes will henceforth require the submission of applicant documentation on bids received and of their scoring (with an emphasis on the second-ranked bid).
Maintenance Documentation:
CBE Technologies, LLC, a Rhode Island service provider, filed an FCC Request for Review of a USAC decision to COMAD funding on two Internal Connections maintenance funding requests for FY 2005 and FY 2007. The COMAD is based on a 2009 audit of a public school district that had paid CBE for equipment warranties for which no documentation was produced "to show specific instances of maintenance."
In its appeal, CBE argues that fixed-price maintenance contracts with "unlimited maintenance for the equipment" (i.e., warranty-type contracts) were E-rate eligible prior to FY 2011. As such, "…the parties' contract, by itself, was sufficient to document the provision of service to the middle school, as it required CBE to provide whatever basic maintenance the covered equipment might need throughout the entire term of the contract – whether that meant fixing something every day or never having to fix anything at all. Under that kind of basic maintenance contract, even if nothing broke, the company would still be legally entitled to the entire upfront fee." Thus, CBE argues, there was no need for documentation such as trouble tickets, service logs, etc. that USAC had requested.
Regardless of the merits of the CBE appeal, the important point to recognize is that, as of FY 2011, equipment warranties are no longer eligible. E-rate funding will be available only for maintenance actually performed. Although funding may be awarded based on estimates of maintenance costs, invoices (BEARs or SPIs) for time and material maintenance services will be paid only for work actually performed. Again, we expect USAC will require detailed invoices and/or maintenance logs on service actually rendered.
E-Rate Updates and Reminders
Red Light Rule Webinar:
USAC will be conducting two Webinars this week on "Understanding the Red Light Rule." The Red Light Rule is the term commonly used to refer to a subset of rules associated with the Debt Collection Improvement Act. Any entity participating in universal service programs — including E-rate applicants and service providers —can be considered in "Red Light" status when that entity's account becomes delinquent by one day. When this happens, USAC will not make any disbursements to the entity (or, in the case of a service provider, its associated SPIN(s)) until the delinquency has been satisfied or until arrangements for payment have been made. Most commonly, an E-rate applicant can be Red Lighted if it fails to pay (or at least appeal) a COMAD. But an applicant can also be affected if one of its service providers is Red Lighted and, as a result, does not receive BEAR payments for the applicant.
The two Webinar sessions (June 27th and 30th) are fully subscribed, but a link to a recording will be posted on the USAC Web site later this week.
Schools and Libraries News Brief dated June 24 – Service Provider Summer Activities
The SLD's News Brief for June 24, 2011, provides additional information on the technology plan section of the Form 486, but focuses primarily on the activities that service providers should be concentrating on over the summer. The tasks include:
- Monitor the progress of any paper forms you submit to USAC.
- Complete your activities related to billing customers and invoicing USAC for any remaining FY 2010 recurring services.
- Assist applicants with responses to PIA review questions if asked.
- Review USAC's website for posted Forms 470.
- Label and file program-related documents.
- Consider attending applicant training in the fall.