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In This Week's Issue
» Funding Status Update
» More Confusion on Bundled End-User Equipment
» E-Rate Updates and Reminders
» Schools and Libraries News Brief dated February 8 — Form 470 Reminders

E-Rate Central News for the Week
February 11, 2013


The E-Rate Central News for the Week is prepared by E-Rate Central. E-Rate Central specializes in providing consulting, compliance, and forms processing services to E-rate applicants. To learn more about our services, please contact us by phone (516-801-7804), fax (516-801-7814), or through our Contact Us Web form. Additional E-rate information is located on the E-Rate Central Web site.

Funding Status

The FY 2013 Form 471 application window opened on Wednesday, December 12, 2012, and will close at 11:59 p.m. (EDT) on Thursday, March 14, 2013.

Wave 30 for FY 2012 will be released on Tuesday, February 12, 2013, for $36.6 million. Priority 2 funding is being provided at 90%, and is being denied at 89% and below. Cumulative funding for FY 2012 will be $1.87 billion.

Wave 80 for FY 2011 will be released on Wednesday, February 13, 2013, for $14.3 million. Priority 2 requests are being funded at 88% and above, and denied at 87% and below. Cumulative funding for FY 2011 will be $2.52 billion.

More Confusion on Bundled End-User Equipment

USAC's monthly conference call with service providers last Wednesday turned contentious when several providers of hosted VoIP services began asking pointed questions about an apparent USAC decision to fund "free" VoIP phones provided by Jive Communications, one of their competitors. Jive's competitors asked:

  • Is it true that Jive FRNs for services that include VoIP phones will be funded without a requirement to allocate out any costs for the ineligible phones?
  • If so, when was this decision made and what plans, if any, does USAC and/or the FCC have to publicize this decision?
  • Does the decision apply equally to similar phone offerings currently, or prospectively, being made by other VoIP providers?
  • If so, what guidelines apply to such service offerings?

Finally and most importantly:

  • How does a decision made in private to fund "free" phones for one particular vendor, without making similar information available to its competitors, comport with the E-rate program's insistence on fair and open competition?

In our view, these are all good questions. USAC's answers last week were less than satisfying. USAC indicated that:

  • FY 2012 Jive FRNs, including those with unallocated phones, are being funded.
  • Funding decisions such as these are being made on a case-by-case basis.
  • This decision was based on an FCC decision in 2010.
  • Because that decision is publicly-available, there is no plan to provide additional guidance.

We have written about bundled end-user equipment eligibility issues several times over the past year. Given the current situation, a brief review is in order.

The 2010 FCC decision refers to a clarification order on gifting (DA 10-2355). In one sentence, the order indicated that "service providers cannot offer special equipment discounts or equipment with service arrangements to E-rate recipients that are not currently available to some other class of subscribers or segment of the public."  Although this sentence applied to gifting rules, not product eligibility, it included a footnote reading:

For example, many cell phones are free or available to the general public at a discounted price with the purchase of a two-year service contract. Schools and libraries are free to take advantage of these deals, without cost allocation, but cannot accept other equipment with service arrangements that are not otherwise available to some segment of the public or class of users. Therefore, a service provider may not offer free iPads to a school with the purchase of telecommunications or Internet access services eligible under E-rate, if such an arrangement is not currently available to the public or a designated class of subscribers.

A little over a year ago, citing this footnote on mobile devices, Jive started offering "free" VoIP phones to its customers on the same basis, initially indicating that both USAC and the FCC concurred with this interpretation. When pushed to confirm, USAC indicated it was seeking guidance from the FCC. As yet, the FCC has not publicly responded.

For USAC to now justify the approval of Jive's FRNs on the basis of the 2010 FCC order is a bit disingenuous. Specifically, it ignores subsequent FCC actions (or inactions). In particular:

  1. Last summer, in response to the release of the draft Eligible Services List ("ESL") for FY 2013, which did not address the issue, the State E-Rate Coordinators' Alliance ("SECA") submitted a request to the FCC to clarify the eligibility of bundled end-user equipment. The FCC requested and received comments on SECA's Petition for Clarification, but has not yet issued an order. This is still an open proceeding.
  2. The last formal FCC position on the free phone issue was a warning issued in last September's final Report and Order (DA 12-1553) for the FY 2013 Eligible Services List indicating that it would "defer acting on these issues for now."

With no formal decision forthcoming from the FCC — unless it provided informal guidance to USAC — it is not surprising that applicants and other service providers are confused by USAC's decisions with regard to Jive Communications.

Unless or until the FCC or USAC provides additional information to the contrary, we expect other VoIP providers to jump quickly onto the free phone bandwagon. While it is a little late in the FY 2013 application cycle, applicants planning new hosted VoIP services should seriously consider applying for discounts on "free" phones as well with the following two provisos:

  1. Recognize that there has been no formal pronouncement from the FCC on the eligibility of bundled VoIP phones, and that cost allocation may ultimately be required for such phones. This was the essence of the FCC's warning in DA 12-1553.
  2. Submit requests for discounts on managed VoIP services with bundled phones on separate Form 471 applications. In the event that such applications are subject to additional scrutiny, this would permit the applicants' other FRNs to be funded in a more timely fashion.

E-Rate Updates and Reminders

Further USAC Guidance on Web Hosting Eligibility:

Increasingly, over the past year, we have seen a number of service providers offering Web- or cloud-based application packages that they claim to be fully or largely E-rate eligible as Web hosting. In its November conference call with service providers, USAC stressed that Web hosting was eligible only with respect to applicants' own Web sites (and for some Web services, only to the extent of the hosting component, not for any associated Web development tools).

Although USAC had indicated that further guidance would be forthcoming in a News Brief, which has not yet occurred, several recent developments have provided additional information. In particular:

  1. USAC appears to be proactively reaching out to cloud-based application providers to explain the limits of Web hosting eligibility.
  2. More specifically, last week, USAC apparently addressed an announcement by Jive Communications (see article above) that as part of its core services to all clients it will be delivering emergency notification services, at no additional cost, that would be covered by E-rate. Jive subsequently indicated that its service announcement had been "premature."
  3. More broadly, USAC has been referring applicants and service providers to the section on ineligible Web hosting in the FY 2013 Eligible Services List (pp. 8-9) which lists:
  • Costs attributable to the creation or modification of information, or design such as a web site creation fee or content maintenance fees.
  • Content supplied as part of a web hosting service created by third-party vendors or the web hosting service provider itself and any features or software involving data input or retrieval other than the provision of applicant-created content for an educational purpose (e.g. teacher web pages or blogs).
  • The parts of a web hosting service including, but not limited to, any portion of tools, capabilities or integration with other systems such as: Student Information Systems (SIS); databases; student attendance or grades or grade management; course scheduling; tests or testing systems; on-line/interactive education systems; and learning/education management systems. (An eligible web hosting service will also not include support for the applications necessary to run online classes or collaborative meetings).

Expanded SPIN Contact Information:

The SLD's online SPIN Contact Search database tool has been expanded to add a "Doing Business As" column to the search results table. In addition to showing "DBA" names, the column may also show "FKA" (i.e., "formerly known as") names for companies that have merged and have been renamed. Since the SLD's SPIN database is organized by formal corporate names, the additional information may be helpful to applicants trying to identify the proper SPINs for their service providers. Note, however, that the database can still only be searched by a company's formal name.

FY 2012 Form 486 Urgent Reminder Letters:

Last Thursday, February 7th, the SLD mailed out the first batch of Form 486 Urgent Reminder Letters for FY 2012. The letters were sent to applicants who:

  • Were funded in Waves 1-12 (for FRNs with service start dates prior to October 1, 2012);
  • Had not submitted and certified Form 486s for those FRNs by January 28th, the extended Form 486 deadline.

Essentially, the Urgent Reminder Letters give those applicants a second 20-day chance to meet the Form 486 deadline. The new deadline for applicants targeted in this first batch is February 27th. Applicants who miss this deadline will have the service start dates on their FRNs reset to new dates calculated as 120 days before whenever they file their late Form 486s. If, for example, a late Form 486 is filed March 1st, the new service start date will be November 1, 2012. For FY 2012 recurring services beginning July 1, 2012, this would mean that no discount would be provided for July-October, and that funding would be reduced by one-third.

Applicants funded in or after Wave 13, who miss their normal Form 486 deadlines (on or after January 30th), will receive Urgent Reminder Letters in subsequent batches.

FY 2013 Form 470 Deadline:

With the Form 471 application window for FY 2013 closing on March 14th, the last day to post a valid Form 470 (and/or RFP if applicable) for such applications is Valentine's Day, February 14th. A Form 470 posted on that date will have an Allowable Contract Date of 28 days thereafter, the day the window closes.

SLD Spring Training for Service Providers:

The SLD announced that its annual training sessions for service providers will be held this year in Atlanta on May 7th and in Los Angeles on May 9th. An agenda for the training sessions is not yet available.

Schools and Libraries News Brief Dated February 8 – Form 470 Reminders

The SLD News Brief for February 8, 2013, poses and answers a series of questions regarding the Form 470, namely:

  • What is the purpose of the Form 470?
  • Why is Thursday, February 14th, the deadline for posting a Form 470 for FY 2013?
  • Am I required to issue a Request for Proposal ("RFP") or similar bidding document?
  • If I issue an RFP, how long must it be available?
  • What is an "open and fair" competitive bidding process?
  • How much detail should I provide about the services sought?
  • Am I required to respond to every e-mail or phone call from a service provider?
  • Why is the category of service I choose in Items 8–11 important?
  • How do I evaluate the bids I receive?
  • Do I have to sign a contract?
  • Can a consultant help me with the competitive bidding process?
  • Where can I get more information?


Disclaimer: This newsletter may contain unofficial information on prospective E-rate developments and/or may reflect our own interpretations of E-rate practices and regulations. Such information is provided for planning and guidance purposes only. It is not meant, in any way, to supplant official announcements and instructions provided by either the SLD or the FCC.