Funding Status
The FY 2012 Form 471 application filing window will open at noon on Monday, January 9, 2012, and will close at 11:59 pm EDT on Tuesday, March 20, 2012.
Wave 25 for FY 2011 will be released on Tuesday, December 6th, for $14.8 million. Cumulative funding for FY 2011 will be $1.34 billion. Priority 2 funding is currently being provided only at the 90% level.
Wave 77 for FY 2010 will be released on Wednesday, December 7th, for $9.8 million. Cumulative funding for FY 2010 will be $2.89 billion. Priority 2 funding is being provided at all discount levels.
Revised Form 479 and Form 486 Instructions
The Form 486 (Receipt of Service Confirmation Form) is required to be filed by a billed entity within 120 days of a Funding Commitment Decision Letter ("FCDL") date or the start of service, whichever is later. The Form 486 has the following three functions:
- Certifies that services have started
- Certifies, if applicable, that the applicant has an approved technology plan
- Certifies, if applicable, that the applicant is CIPA-compliant
In the case of a consortium, it is the consortium leader who files the Form 486. If CIPA compliance is required — i.e., for any services other than Telecommunications Services — the consortium leader must first collect a Form 479 (Certification by Administrative Authority to Billed Entity of Compliance with the Childrens Internet Protection Act) from each member of the consortium. In this case, each member is certifying that it is CIPA-compliant, permitting the consortium leader, in turn, to file a Form 486 certifying that all of its members are compliant. Interestingly, the Form 479 is the only E-rate form not filed with USAC; instead it is collected by and retained by the consortium leader.
Last August, the FCC revised its CIPA rules (see FCC 11-125) to conform to the added provisions of the Protecting Children in the 21st Century Act. When doing so, the FCC concluded that the actual Form 479 and Form 486 did not need to be revised since the critical CIPA certification in both forms states that the filer(s) "has (have) complied with the requirements of the Childrens Internet Protection Act." Since the applicable provisions of the Protecting Children in the 21st Century Act amended CIPA, and since descriptions of those requirements are summarized in the forms instructions, only those instructions needed to be changed.
The revised Form 479 and Form 486 instructions were released last week and are now available in the Required Forms section of the SLDs Web site. The following three points should be noted:
Internet Safety Policy. Schools and libraries receiving universal service discounts are required to adopt and enforce an Internet safety policy that includes a technology protection measure that protects against access by adults and minors to visual depictions that are obscene, child pornography, or — with respect to use of computers with Internet access by minors — harmful to minors.
Technology Protection Measure. A technology protection measure is a specific technology that blocks or filters Internet access. The school or library must enforce the operation of the technology protection measure during the use of its computers with Internet access, although an administrator, supervisor, or other person authorized by the authority with responsibility for administration of the school or library may disable the technology protection measure during use by an adult to enable access for bona fide research or other lawful purpose. In order to receive discounts for Internet Access, Internal Connections and Basic Maintenance services under the universal service support mechanism, school and library authorities must certify that they are enforcing a policy of Internet safety as explained in Section V.
This added emphasis suggests that applicants may need to pay greater attention to the retention of records documenting CIPA compliance such as filtering and student education logs.
- The change to cover the requirements of the Protecting Children in the 21st Century Act is the straightforward addition of a new instructional paragraph reading:
For schools, the Internet safety policy must also include monitoring the online activities of minors. (Note: Beginning July 1, 2012, when schools certify their compliance with CIPA, they will also be certifying that their Internet safety policies have been updated to provide for educating minors about appropriate online behavior, including interacting with other individuals on social networking websites and in chat rooms and cyberbullying awareness and response.)
- There is now a much stronger emphasis on an applicants responsibility to enforce, not simply to have, an Internet safety policy and filtering. The previous April 2007 version of the instructions contained only one reference to enforcement reading:
In order to receive discounts for Internet Access, Internal Connections and Basic Maintenance services under the universal service support mechanism, school and library authorities must certify that they are enforcing a policy of Internet safety as explained in Section V.
As was the case in the underlying CIPA language and in the implementing FCC Orders, enforcement is now stressed in the instructions in the two following paragraphs (emphasis added in red):
- Interestingly, given that technology plans are now only required for Priority 2 services, the Form 486 instruction for the tech plan certification has not been updated. It still refers to an exclusion from the tech plan requirement only for "basic telephone service." Based on current rules, the proper Form 486 instruction for tech plans should read as follows (proposed changes in red):
Item 8 - Check this box to certify that the schools and libraries listed on this Form 486 are covered by technology plans that have been approved by a state or other authorized body – a USAC-certified technology plan approver – prior to the commencement of service and that cover all 12 months of the funding year. If applicable, provide the name(s) of the organization(s) that are the USAC-certified technology plan approver(s) that approved a technology plan for any eligible entity that is receiving services covered under this Form 486. If EVERY FRN listed in the Form 486 is for Priority 1 service only, enter "NONE." Each entity receiving more than Priority 1 services in the FRNs listed on this Form 486 MUST be included under a technology plan that has been approved by a reviewing organization, and that organization MUST have been certified by USAC for the Funding Year referenced on the Form 486. If you have any questions about technology plan review, please check "Develop a Technology Plan" on our website.
FCC Decisions on "Innocent Victim" Appeals
The FCC released two decisions last week denying appeals by service providers who had been caught up in earlier competitive bidding violations in Dallas and Houston. In both cases, the service providers argued that they: (a) were not responsible for (or even aware of) the violations; (b) had done the work as contracted; and (c) in fairness, were entitled to payment from USAC for the discounted portion of their work. The FCC decisions, and the logic behind them, are instructive.
The first appeal decision (FCC 11-175) involved Lakehills Consulting. In early 2007, Lakehills acquired all the assets and liabilities of Analytical Computer Services ("ACS") including contracts for E-rate work for Houston ISD. At about the same time, the Houston Chronicle published a story questioning HISDs selection of ACS, largely because of its relationship with another company, Micro System Enterprises ("MSE"), whose president had been indicted as the result of competitive bidding violations involving Dallas ISD. A subsequent Department of Justice investigation determined that that bidding violations had in fact occurred in Houston. In 2010, HISD entered into a settlement agreement involving the repayment of certain E-rate funds and the relinquishment of other funding commitments for FY 2002-2004.
As is often the case while such E-rate investigations are pending, very little information is made available to the applicants or service providers. In this case, Lakehills continued to do work initially contracted to ACS. Invoices to USAC for the discounted portion of this work, however, were not getting paid — with little explanation. When it finally became clear, Lakehills filed an FCC appeal arguing that it should not be held responsible for violations by either ACS or HISD. The problem, from Lakehills perspective, was that USAC was withholding payments of at least $20.1 million and was seeking the return of approximately $62 million in previously disbursed funds. Perhaps not surprisingly, the situation had pushed Lakehills into bankruptcy. The FCC appeal was actually filed by Lakehills bankruptcy trustee.
The second and similar appeal decision (FCC 11-177) involved Lazo Technologies and two other service providers. The problem in this case traced back to the original competitive bidding violations involving MSE. The three service providers had been providing services to Dallas ISD under an MSE-led service consortium. The problem again was that USAC payments to these service providers were being held. The appeal "…argued that they should receive the balance owed on the outstanding invoice because they completed the cabling project pursuant to their contract with DISD, they were never involved in any fraudulent activity, USAC fully paid other suppliers and contractors that were part of the MSE Consortium and neither USAC nor DISD ever notified Petitioners to cease work."
In both appeals, the service providers argued that they were essentially innocent victims of competitive bidding violations incurred, without their knowledge, by other parties. In fairness, they should be paid for work they had performed in good faith.
In denying both appeals, the FCC effectively sidestepped issues of service provider knowledge or fairness. It stressed that payments cannot be made on services provided under contracts "tainted by the misconduct" of applicants or service providers. Specifically, in the Lazo decision, the FCC ruled that the "alleged lack of knowledge or involvement in the misconduct between MSE and DISD is not relevant to whether USAC correctly denied funding for work performed under the DISD contract. To the extent the Petitioners believe they have a valid claim for payment for work performed under the DISD contract, their proper recourse is through civil action against MSE or the DISD."
These decisions provide a clear and firm warning to subcontractors, or even acquirers, of E-rate service providers that any payments due them under these relationships will be strictly governed by the E-rate rules, whether or not they themselves are subject to blame.
E-Rate Updates and Reminders
First Deadline for Form 486 Urgent Reminder Letters:
As discussed in our newsletter of November 21, 2011 — and as the process was previously explained in the SLDs News Brief for November 4, 2011 — USAC sent out 2,040 Form 486 Urgent Reminders on November 16th. These letters were sent to applicants funded in the first few waves of FY 2011 who appeared to have missed their Form 486 filing deadlines. They gave the applicants an additional 20 days to submit their Form 486s without penalty. The response deadline for this first batch of reminder letters is Tuesday, December 6th.
Applicants failing to respond in a timely manner to these or any subsequently issued Form 486 Reminder Letters will see the service start dates of their associated FRNs changed to later dates with, at least for recurring services, commensurate reductions in funding.
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 December 2 – Eligible Services
Last week's SLD News Brief for December 2, 2011, reviews the eligible services categories and some of the important application issues surrounding these services.
Most interestingly: Although it is customary to refer to four categories of E-rate services, technically there are now five. When the FCC renewed the eligibility of dark fiber service, it created a separate category for it called "Telecommunications." Confusingly, this was to distinguish dark fiber from the all the other normal transmission services included in the "Telecommunications Services" category. While this appears to be playing with words, there is one practical difference. Dark fiber "Telecommunications" may be provided by any type of E-rate service provider; other "Telecommunications Services" may be provided only by eligible telecommunications carriers.
Since E-rate forms only use the four basic categories, the SLD "suggests" that an applicant applying for dark fiber "Telecommunications" services list the requirement on its Form 470 under both Telecommunications Services and Internet Access. If the applicant ultimately selects an eligible telecommunications carrier to provide the service, the Form 471 funding request should be categorized as Telecommunications Services. If a non-telecom provider is selected, the funding request should be categorized as Internet Access.
Other topics covered in the most recent News Brief include:
- Partial eligibility
- Conditional eligibility
- Ancillary use
- On-premise Priority 1 equipment
- Wide area networks
- Educational purposes