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In This Week's Issue
» Funding Status Update
» Priority 2 Funding Outlook for FY 2013, cont.
» E-Rate Updates and Reminders
» Schools and Libraries News Brief dated May 3 — Missing Item 21 Attachments

E-Rate Central News for the Week
May 6, 2013

Introduction

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 filing window closed March 14, 2013. USAC released its preliminary estimate of FY 2013 demand showing an overall decrease from FY 2012 of 5%, but an increase of 17% in the total demand for Priority 1 and the 90% level for Priority 2. By our estimates, full funding of Priority 2 applications at the 90% level would require roll-over funds of $1.5–1.6 billion, an unlikely amount.

Wave 42 for FY 2012 will be released on Tuesday, May 7, 2013, for $49.6 million. Priority 2 funding is being provided at 90%, and is being denied at 89% and below. Cumulative funding for FY 2012 will be $2.21 billion.

Wave 91 for FY 2011 will be released on Wednesday, May 8, 2013, for $24.0 million, including $29 thousand for one New York applicant. Priority 2 requests are being funded at 88% and above, and denied at 87% and below. Cumulative funding for FY 2011 will be $2.58 billion.

Priority 2 Funding Outlook for FY 2013, cont.

In our previous week's newsletter of April 29, 2013, we estimated that full funding of Priority 2 requests at the 90% level for FY 2013 would require the FCC to roll-over "at least $1.2 billion — or more" of previously unused funds. Upon further analysis, it appears that "or more" is a better estimate. As indicated below, using FY 2012 as a guide, the required roll-over amount may need to be at least $1.5–1.6 billion. The key aspects of this analysis are as follows:

  1. USAC's preliminary estimate of FY 2013 demand showed an increase of 17% in the critical components of Priority 1 and the 90% level for Priority 2. This includes $2.71 billion in Priority 1 demand and $1.76 billion in 90% Priority 2 demand, for a total of $4.47 billion. In terms of available funds, the inflation-adjusted cap for FY 2013 funding, before roll-over, is only $2.34 billion — a shortfall of $2.09 billion (plus $10 million for SLD operating expenses, net of interest income).
  2. Fortunately, as stated in the cover letter to the preliminary demand table, "USAC's reviews will ultimately reduce the FY 2013 demand" to a lower commitment level. This reduction can be estimated from past experience — an estimate that becomes more accurate over time as more and more applications are reviewed. If USAC and the FCC are to make final decisions on Priority 2 funding, however, they must either (a) use conservative estimates of the expected reduction in demand, or (b) wait a year or more until almost all the applications are reviewed.
  3. In recent years, committed funding for Priority 1 has averaged about 84% of the preliminary demand, with a range of 80-90%. The table below shows the full range, but assumes that any relatively early funding decision (as occurred in FY 2012) would be based on the upper end of the range.
  4. Priority 2 commitments, as a percentage of preliminary demand (for any given threshold level), have historically been lower, but have shown greater variation. For our analysis, we have assumed a range of 65-80%, again focusing on the upper end.
  5. The table below provides FY 2012 and FY 2013 estimates of required commitments (based on each year's preliminary demand estimates) for Priority 1 at all levels, Priority 2 at 90%, and the combination. It shows that $1.50 -1.60 billion in roll-over funding would be required to fully fund Priority 2 at 90% in order to achieve the same level of available fund coverage as in FY 2012.
90% Internal Connections Funding Analysis
($ in billions)
  FY 2012   FY 2013  
Estimated Commitment Demand
Preliminary P1 Demand $ 2.44   $ 2.71  
Commitment Estimate @ 80-90% 1.95 – 2.20   2.17 – 2.44  
Preliminary 90% P2 Demand 1.38   1.76  
Commitment Estimate @ 65-80% 0.90 – 1.10   1.14 – 1.41  
Preliminary P1 + 90% P2 Demand 3.82   4.47  
Total Commitment Estimate 2.85 – 3.30   3.31 – 3.85  
Available Funding
Inflation-Adjusted Cap 2.34   2.38  
Roll-over 1.05 Actual  1.50 – 1.60 Required?
  $ 3.39   $ 3.88 – 3.98  

If these estimates are correct, the real problem will be to find $1.5–1.6 billion in roll-over funds, a decision that the FCC typically does not make until early summer. Roll-over funding at this level would be unprecedented. If sufficient funds cannot be found to cover all valid 90% requests, the only tool the FCC has under the current rules is to prorate the available funds among the 90% applicants.

We discussed the problem of proration last year (see our newsletter of April 30, 2012), and will do so again if the situation arises.

E-Rate Updates and Reminders

Final FY 2013 Application Deadlines:

As reported in the  SLD News Brief for April 19, 2013, USAC issued two types of letters in late April — Notification of FCC Form 471 With No Certification letters and Item 21 Attachment Urgent Reminder Letters — to applicants who may not have fully completed their Form 471 applications for FY 2013.

Shortly after the letters were mailed, the SLD posted an online List of FY 2013 FRNs with potentially missing Item 21 attachments (see SLD News Brief for April 26, 2013). In our experience, many of the "missing" Item 21 attachments were actually submitted, but had not yet been matched with the associated applications by the time the SLD generated its list. If an applicant believes that Item 21 attachments shown on this list were submitted, it can either resubmit them or confirm receipt by the SLD using the Submit a Question online. When making an online inquiry, be sure to identify the application and FRN numbers so that the assigned case number, question, and response will reference the specific FRNs in question.

Last week, the SLD also posted an online list of 732 Uncertified Form 471s for FY 2013.

To avoid application denials, all missing Item 21 attachments and certifications must be submitted by May 15, 2013.

SLD Fall Applicant Training Schedule:

The SLD announced the schedule and registration procedures for its 2013 fall applicant training. This year's training will be one-day only and will be held in the following eight cities (click on the individual links to register):

Washington, DC   September 30, 2013
Newark, NJ   October 8, 2013
Minneapolis, MN   October 15, 2013
St. Louis, MO   October  22, 2013
Atlanta, GA   October 24, 2013
Houston, TX   October 29, 2013
Los Angeles, CA   November 5, 2013
Portland, OR   November 7, 2013

Tom Wheeler Nominated as FCC Chairman:

President Obama has nominated Tom Wheeler to be the next Chairman of the FCC to replace Julius Genachowski, who announced his resignation in March. President Obama also appointed current FCC Commissioner Mignon Clyburn to act as the interim Chairwoman pending Mr. Wheeler's confirmation by the Senate.

Mr. Wheeler is currently a managing director of Core Capital Partners, a Washington investment firm. In his past, Mr. Wheeler had served as the executive director of both the National Cable Television Association ("NCTA") and the Cellular Telecommunications and Internet Association ("CTIA"). More anecdotally, as mentioned in a New York Times report, his telecommunications experience includes authoring a 2008 book entitled "Mr. Lincoln's T-Mails:  How Abraham Lincoln Used the Telegraph to Win the Civil War."

Internet Explorer 10 and the SLD Website:

Users who have upgraded to Internet Explorer 10 (or have a new Windows 8 computer bundled with Internet Explorer 10) may find that certain search functions on the SLD's website do not work properly. The Entity Search function, for example, returns the error message "Entity Number: Only one Search Criteria value can be entered at a time," even if only one search field is properly used.

The problem may be corrected by using Internet Explorer's Compatibility View which displays websites as if they were being viewed in a previous version of the browser. The easiest way to use Compatibility View is by clicking its icon on Internet Explorer's Web address line (see picture below). (The icon only appears if there is a compatibility problem on that Web page.)  It is initially gray, but turns blue to indicate compatibility mode is on. Unless clicked again to revert to version 10 on that Web page, the computer should remember to automatically open that page in compatibility mode in the future.

Picture of the Compatibility View button

Congressman Markey Running for Senate:

The initial impetus for the E-rate program, tracing back to the Telecommunications Act of 1996, was provided by two Senators and a Congressman. The two Senators were Olympia Snowe (R–ME), who retired after the completion of her term in 2012, and Jay Rockefeller (D–WV) who has announced his retirement after the completion of his term in 2014.

On the House side, the key E-rate proponent has been Rep. Edward Markey (D–MA). Last week, Rep. Markey won the Massachusetts's Democratic primary to run in a special general election June 25th to fill the Senate seat vacated by John Kerry (D–MA) who became Secretary of State.

FCC Appeal Decisions Watch:

The FCC released appeal decisions last week denying requests by two applicants cited for competitive bidding violations. In particular:

  1. Pennsauken Township SD (DA 13-870):  The school district had been denied funding for failing to adequately document its vendor selection process. The district had received only one bid from its Form 470, had initially selected the one bidder, but was apparently unable to obtain a contract in time to file its Form 471. Instead, the district reached out to a second supplier for a contract and filed its Form 471 with that vendor. The FCC found that the district had provided no documentation on the failure of the first supplier to reach a contract, or a bid assessment comparing the bids of the two service providers.
  2. Spokane SD 81 (DA 13-873):  The school district had released an RFP, but had filed a Form 470 indicating that there was no RFP. Often the FCC will waive a violation of this nature, but only if it is clear that the competitive process was not compromised. In this case, the FCC found that the RFP contained detailed information not available in the Form 470 and included specific language stating that "All bidders must read and understand" the RFP in its entirety.

Schools and Libraries News Brief Dated May 3 – FY 2013 Application Deadlines

The SLD News Brief for May 3, 2013, announces the fall training schedule (discussed above) and reviews the procedures for submitting missing certifications and Item 21 attachments on FY 2013 applications which are due by May 15th (also discussed above).

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.