News of the Week

Funding Status

Current indications are that the FY 2012 Form 471 application window will open on, or shortly after, January 5, 2012, and close either March 15 or March 22, 2012. USAC is expected to announce the exact window dates shortly.

Wave 23 for FY 2011 will be released on Tuesday, November 22nd. Cumulative funding for FY 2011 will be $1.3 billion. Priority 2 funding is currently being provided only at the 90% level.

Wave 76 for FY 2010 will be released on Wednesday, November 23rd. Cumulative funding for FY 2010 is $2.84 billion. Priority 2 funding is being provided at all discount levels.

FFL Initiative to Increase E-Rate Funding

On November 14, the E-rate consulting firm Funds For Learning ("FFL") released an open letter to FCC Chairman Genachowski asking the Commission to allocate additional funds to E-rate. Coincident with this letter, FFL initiated a broad online petition drive to gather support for its position. As background, the following points should be noted:

1. As the E-rate demand for Telecommunications and Internet Access services (defined as Priority 1) continues to grow, less funding remains available for the equipment and maintenance services that make up Internal Connections (defined as Priority 2). Over the 14 year history of E-rate, Priority 2 funding at discount rates of 80% or less has been provided in only five years. Funding at all discount rates has been available only twice. Without additional funds and/or programmatic changes, this situation is widely expected to worsen.
2. E-rate is one of four Universal Service Fund ("USF") programs administered by the FCC. The "Universal Service" concept traces back to the Communications Act of 1934 and the objective of providing universal access to reasonably-priced telephone service for all Americans — specifically for those in rural areas where the cost of providing service was high. Under the USF mechanism, all telephone companies have been required to contribute a portion of their interstate revenues into a fund that is then used to subsidize telephone service in these high cost areas. Over the years, USF has grown to encompass: (a) the original High Cost program; (b) a Low Income program, subsidizing telephone service for disadvantaged families; (c) a small Rural Health program, providing telecommunications discounts for public or non-profit healthcare providers in rural areas; and (d) the Schools and Libraries program, more commonly known as E-rate. As the demand for USF funds has grown — particularly in the High Cost program — and interstate revenues have declined, the USF mechanism has come under increasing pressure.
3. In late October, the FCC approved the creation of a new Connect America Fund ("CAF") to replace the existing High Cost program. The primary purpose of the CAF program, in addition to capping expenditures and requiring greater accountability, is to support the development of broadband networks in high cost areas. The Order (FCC 11-161) is extensive, but a shorter Executive Summary of the CAF Order is available.

Most importantly, it should be noted that the FFL proposal does not suggest increasing the size of the Universal Service Fund (which would require additional contributions from telecommunications and Internet companies). Instead, the proposal suggests that a portion of the $4.5 billion Connect America Fund be redirected into the E-rate program. Essentially, Funds For Learning is arguing that providing more USF funds to schools and libraries would more efficiently advance the goals of the National Broadband Plan than using those funds to subsidize the overall costs incurred by carriers to expand broadband coverage to everyone in rural areas.

This is likely to be a tough sell — perhaps why FFL is seeking support through its online petition initiative. In particular:

1. The Connect America Fund Order is the culmination of a multi-year effort to reform and redirect funding for the High Cost program. At this stage, we suspect that the FCC will be reluctant to revisit any significant aspects of the new Order. The CAF order, for example, notes that:
   1. Prior to its release, the FCC received over 2,700 comments and had "held over 400 meetings with a broad cross-section of industry and consumer advocates."  The FFL proposal may be too little too late.
   2. The annual $4.5 billion CAF budget is described as "firm and comprehensive" — one that the FCC "may revisit and adjust," but only by the end of the initial six-year phase-in period."
2. Attempts to trade-off dollars targeted for general broadband development in rural areas to provide additional E-rate funds for schools and libraries (both rural and urban) would likely be politically contentious. Although schools and libraries can play a major role in making broadband available to communities, detractors would note that E-rate is already funded at over 50% of the CAF cap.

The good news in the CAF order for schools and libraries in rural areas is that the CAF's goal is to bring down pre-discount costs of broadband to everyone in high-cost, under-served areas, including higher-speed access for "community anchor institutions" (schools, libraries, healthcare providers, public safety entities, colleges, etc.). Specifically, an important footnote states:

There is nothing in this order that requires a carrier to provide broadband service to a community anchor institution at a certain rate, but we acknowledge that community anchor institutions generally require more bandwidth than a residential customer, and expect that ETCs would provide higher bandwidth offerings to community anchor institutions in high-cost areas at rates that are reasonably comparable to comparable offerings to community anchor institutions in urban areas.

E-Rate Updates and Reminders

Form 486 Urgent Reminder Letters:

The most recent SLD News Brief reported that USAC had sent out its first batch (2,040 in total) of Form 486 Urgent Reminders on November 16th. As discussed in its News Brief for November 4, 2011, USAC sent these letters to applicants funded in the first few waves of FY 2011 who appear to have missed their Form 486 filing deadlines. The Urgent Reminder Letters affords applicants an additional 20 days (from the letters' dates) to submit their Form 486s without penalty.

As a reminder, a Form 486 is due 120 days from the later of (a) the FCDL date or (b) the first date to receive service (typically July 1st of the funding year).  Most frequently, Form 486 deadlines depend upon the wave in which an applicant is funded. Assuming a service start date of July 1, 2011, the following table shows the wave-by-wave Form 486 deadlines through the end of 2011:

Fall E-Rate Training:

The SLD has completed its fall training schedule. The agenda and slides for the SLD's 2011 training are available online.

USAC training videos are also available online. Two short ones on Form 470 Filing and Dark Fiber are on the USAC Web site. Longer presentations on E-Rate Topics (and other Universal Service Fund programs) are available on YouTube.

Applicants seeking other E-rate training opportunities should check for state-sponsored E-rate workshops.  Contact information for State E-rate Coordinators may be found on the State Information pages of the E-Rate Central Web site.  Other sources of basic E-rate training include the two Webinars conducted by E-Rate Central earlier this year which are available online at http://www.webjunction.org/techplan-erate.  A copy of E-Rate Central's presentation slides used for the New York training is also available.

Schools and Libraries News Brief dated November 18 – Form 470 and Technology Plan

In addition to a notice on the issuance of Form 486 Urgent Reminder Letters (discussed above), last week's SLD News Brief for November 18, 2011, reviews the relationship between technology planning and the Form 470, providing answers to the questions listed below. Note that some of the questions and answers apply equally to a Form 470 for Priority 1 services that no longer need a technology plan.

• How do I avoid an overly broad Form 470?
• How long and how detailed should my technology plan and Form 470 be?
• What effect should my needs assessment have on my Form 470?
• How specific should I be about the scope of my project?
• What effects could minor or major changes to my technology plan have on the Form 470 I already filed?