News of the Week

Funding Status

Wave 6 for FY 2011 will be released on Tuesday, July 26th, for $35.4 million.  Cumulative funding for FY 2011 will be $611 million.  Only Priority 1 applications are being funded at this time.

Wave 59 for FY 2010 will be released on Wednesday, July 27th, for $5.4 million.  Cumulative funding for FY 2010 will be $2.56 billion.  Priority 2 funding is still being awarded at 81% and above, and denied at 79% and below.

Limited Comments Received on ESL for FY 2012 

The FCC's proposed Eligible Services List ("ESL") for FY 2012, released for public comment last month, included an extensive list of changes (see our newsletter of June 27th).  Most of these changes, however, were clarifying in nature — the most likely reason why the FCC received only a handful of comments by the July 15th deadline.  Reply comments are due this Monday, July 25th, and are unlikely to be numerous.

The most significant comments, addressing the ESL language on basic maintenance, were filed by Cisco Systems.  Cisco agreed with the FCC that basic maintenance should remain eligible, but strongly urged the FCC to provide additional clarification on how the price of a maintenance contract that includes both eligible and ineligible services should be cost allocated.  Cisco correctly notes that neither the draft ESL nor the SLD's Web site provides any examples of an appropriate cost allocation methodology for basic maintenance.  Cisco is particularly concerned because of an earlier SLD finding that Cisco's primary maintenance product, SMARTnet, was ineligible.  Although the FCC provided additional guidance last December, the clarifying language is not included in the current ESL draft.

E-Rate Central agrees that the ESL needs to incorporate the FCC's language from the Clarification Order, but believes that even that guidance may prove insufficient as the SLD begins its detailed review of FY 2011's Priority 2 applications and/or subsequent maintenance invoices.

Other significant ESL comments are summarized below.

CenturyLink asks for clarification on two dark fiber issues, namely the ineligibility of: (1) on-premise installation charges for dark fiber; and (2) fiber strands for future use.

Edline argues that e-mail and Web hosting are functionally equivalent —a bit of a stretch that makes for interesting reading — and should be covered in a single ESL "function" category with the same eligibility (including content editing).

Funds For Learning (FFL) also commented on basic maintenance, noting that the FCC's decision not to fund warranty and retainer contracts is inconsistent with common marketplace practices and may not be cost-effective.  FFL urges the FCC to revisit the issue through a Notice of Inquiry.  FFL argues separately for the eligibility of intrusion detection and prevention systems.

The National Hispanic Media Coalition argues for the eligibility of computer lab staffing and user training.  However important these services are, this would require a major change in E-rate eligibility philosophy, far outside the scope of the current review of the proposed Eligible Services List.

The State E-Rate Coordinators' Alliance ("SECA") asks the FCC to make all operating telecommunications surcharges and fees (e.g., administrative fees) eligible.  SECA argues that such fees are typically small and are a necessary cost of service.  Making them eligible would greatly simplify the application and invoicing process.  SECA also suggests: (1) allowing the posting of any Priority 1 service in either the Telecommunications or Internet Access categories of a Form 470; and (2) clarifying the eligibility of telephone lines used for alarm services.

Denials for Missing Item 21 Attachments

Two weeks ago, several hundred applicants began receiving PIA notices indicating that some or all of their FRNs would not be funded because the Item 21 attachments supporting those FRNs were not received by the filing deadline.  It appears that some of these notices were sent in error and are now being corrected.

The background on this situation is important.  The FCC's Sixth Report and Order, released last fall, changed the rule on the submission of Item 21 attachments, henceforth requiring that they be filed within the application window.  USAC provided some flexibility on this deadline by issuing over 15,500 Item 21 Attachment Urgent Reminder Letters to applicants who had not filed Item 21 attachments online, setting a final submission deadline of May 17th.  This caused some confusion at the time because the letters indicated only that the Item 21 attachments may not have been filed.  In most cases, the applicants had indeed filed their attachment, albeit by mail, fax, or e-mail.

The recent PIA notices, on the other hand, specifically referenced missing Item 21 attachments on an FRN-by-FRN basis.  Unfortunately, "missing" in this case meant either that the attachments had never been submitted or, more problematically, that USAC had not matched up submitted attachments with their associated applications.

In recent years, Item 21 attachments have not been a major issue.  If PIA was reviewing an application without attachments, it simply asked the applicant to submit them.  If the attachments had already been filed, but PIA didn't have them, asking the applicant to file a second set was merely an inconvenience.  This year, however, missing attachments were grounds for denial.  Worse yet, the PIA notices that went to affected applicants suggested that the referenced FRNs were set to be denied unless the applicants could prove — and prove quickly — that the attachments had been timely filed.

Somewhat surprisingly — perhaps because USAC felt it had already warned applicants last spring — the notices did not include the standard 15-day response deadline.  As a result, Wave 5, issued last week, included denials for an estimated 65 FRNs totaling $583,000 for 23 applicants.  Some of these denials may be legitimate, but others may reflect imperfections in USAC's procedures to match applications with attachments.

USAC, to its credit, appears to have recognized the problem.  The problem reportedly stemmed from a computer system failure to upload a number of attachments that had been captured during data entry.  USAC has already identified many of the applicants who were mistakenly sent "no Item 21" notices and is e-mailing them with instructions to disregard those earlier notices.  Applicants incorrectly denied funding for missing attachments in Wave 5 should hold off on immediate appeals pending corrective action (the so-called "self-identified appeal" process) by USAC.

E-Rate Updates and Reminders – Fall Training

SLD Fall Training:

The schedule for the SLD's annual applicant workshops is shown below.  Registration for these workshops has been open since May, and all but two are currently available only on a waiting list basis.  Many state-sponsored E-rate workshops are also typically available each fall.

Schools and Libraries News Brief dated July 22 – Writing Appeals

The SLD's News Brief for July 22, 2011, discusses writing appeals of unfavorable decisions to USAC or the FCC.  The following guidance is provided:

• Mark your submission as an appeal.
• Identify yourself.
• Specify the USAC decision you are appealing.
• State briefly why you feel the USAC decision is incorrect.
• Note any other information that should be reviewed.
• Retain all documentation.