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In This Week's Issue
» Funding Status Update
» E-Rate 2.0 NPRM – Ensuring Broadband Access
» E-Rate Updates and Reminders
» Schools and Libraries News Brief for August 2 – Approved Appeals

E-Rate Central News for the Week
August 5, 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

Wave 12 for FY 2013 will be released on Tuesday, August 6, 2013, for $39.2 million.  Funding is currently being provided for Priority 1 services only.  Cumulative funding for FY 2013 will be $338 million — less than half the cumulative funding of $864 million for FY 2012 as of this time last year.

Wave 54 for FY 2012 will be released on Wednesday, August 7, 2013, for $21.6 million.  Priority 2 funding is being provided at 90%, and is being denied at 89% and below.  Cumulative funding for FY 2012 will be $2.70 billion.

Wave 99 for FY 2011 will also be released on Wednesday, August 7, 2013, for $2.0 million.  Priority 2 requests are being funded at 88% and above, and denied at 87% and below.  Cumulative funding for FY 2011 is $2.61 billion.

Invoicing Update:

The SLD News Brief referenced below also includes a short update on the online invoicing system which is currently inoperable while updates are being made to incorporate the new data fields of the revised Form 472 (“BEAR”) and Form 474 (“SPI”).  The update indicates that the online SPI should be available by the end of this week.  Work on the online BEAR “continues.”  In the meantime, invoices may be filed using a paper BEAR or SPI. 

Type-in PDF versions of both forms, as well as a Form 473 (“SPAC”), are available in E-Rate Central’s Forms Rack.

E-Rate 2.0 NPRM – Ensuring Broadband Access

This is the third in a series of articles discussing the FCC’s Notice of Proposed Rulemaking for Modernizing the E-rate Program for Schools and Libraries (FCC 13-100), the “E‑Rate 2.0 NPRM,” which was formally released on July 23rd.  This article discusses the first of the FCC’s primary goals, ensuring affordable access to 21st century broadband services.

Background:

To a very large extent, interest in E-Rate 2.0 is being driven by two developments:

  1. When E-rate was first authorized under the Telecommunications Act of 1996, less than 15% of the nation’s classrooms were connected to the Internet, and the majority of the connections were at dial-up speeds.  Today, essentially all schools and libraries are connected to the Internet.  The question now, particularly in light of the move to online assessments, is at what speed?  The President’s ConnectED initiative and the SETDA (State Education Technology Directors Association) recommendations generally agree on the near-term need for speeds of 100 Mbps per school per 1,000 students, increasing to 1 Gbps by the end of the decade.
  2. As schools have been moving in this direction, the demand for Priority 1 funding has been growing, now surpassing the annual E-rate funding cap.  This year, for the first time, no E-rate funding may be available for Priority 2, even at the 90% level.  Financially, E-rate has hit the wall.

There appears to be only two solutions to this problem.  One approach, addressed but not stressed in the NPRM, is to increase funding, either temporarily or permanently.  The question, of course, is where to find that funding.  The other approach — akin to the proverbial rearranging of deckchairs on the Titanic — is to redistribute funding by making less services eligible and/or reducing funding to some applicants.  Either approach (or combination) benefits some applicants (and service providers) and hurts others.  As discussed below, the NPRM includes a multitude of options, few of which are likely to be applauded by all.

Funding for Broadband Connections:

To funnel more E-rate funds to broadband, the NPRM discusses a number of options, including:

  1. Eliminating the difference between lit and dark fiber eligibility by making special construction charges and terminating equipment for dark fiber eligible.  Since the difference between lit and dark fiber is often the negligible cost of GBIC ownership, this is unlikely to be a controversial proposal.
  2. Making the purchase of actual fiber or IRUs (indefeasible rights to use) eligible (as opposed to funding only fiber services).  This would be a major shift away from the current policy of funding of services only in Priority 1, but could be more cost-effective in the long run.
  3. Ensuring technology neutrality between fiber and radio-based broadband technologies.
  4. Reconsidering the current requirement to amortize installation costs over a period of at least three years.  This would make purchases more attractive, but could lead to spikes in E-rate funding demand.

Phasing Down Support for Certain Services:

The NPRM discusses a number of options for making fewer services eligible, including the elimination of:

  1. Paging services.  This would be a small, but relatively benign, change.
  2. Certain components of voice service such as directory assistance, 800 numbers, custom calling, etc.  Since these services are not too expensive and are often buried deep within many phone bills (if listed individually at all), and would have to be cost allocated out, this may be a poor funding vs. administration trade-off.
  3. All basic telephone service, local and long distance, possibly including basic VoIP.  A question is raised as to whether this would be possible without statutory changes.
  4. Cellular text messaging, or even e-mail services.  Given the importance of these services to 24x7 online learning, this option may be a non-starter.
  5. Web hosting.  The high cost allocation being assigned to web hosting, as a percent of online application packages, has raised questions about the desirability of making web hosting eligible at all.
  6. Funding for non-instructional buildings.  If the primary goal is student Internet access, funding for non-instructional buildings may be questionable, presumably unless the NIF is the NOC.
  7. Certain Internal Connections equipment.  One proposal would limit internal equipment to specific terminating hardware and a limited numbers of drops or wireless access points.
  8. Basic maintenance.  Concerns have been raised about the level of funding being requested, the complexity of the resulting application and invoice review process, and the poor utilization of awarded funding in this category.

If any of these services are made ineligible, the NPRM asks whether eligibility should be phased out or terminated at once.

Ensuring Equitable Access to Limited E-rate Funds:

This is an area of exploration which would create major funding dislocations for certain applicants.  The NPRM discusses 4-6 options, namely:

  1. Modifying the discount matrix.  One option which has been discussed for a number of years is to reduce the maximum discount rate from 90% to 70-80%, either across the board, with lower current rates being scaled back accordingly, or for Priority 2 alone.  Not only would this reduce E-rate‘s share of pre-discount costs, but, by increasing applicant share, it would likely reduce the pre-discount amounts as well.

    Another option, listed separately, is the possibility of either increasing or eliminating the discount matrix distinctions between rural and urban.
  2. Providing support based on district-wide eligibility.  The FCC proposes to calculate school district discounts based on total student eligibility rather than on a school-by-school basis.  This would always give a district an even matrix discount, as is currently the case for libraries, rather than some midpoint aggregate average.  For a district currently comprised of schools at different discount rates, this would eliminate Priority 2 cherry-picking requests for only the higher discount schools.
  3. Setting budgets or limits.  One proposal being aggressively promoted is to limit any school or library to a fixed pre-discount cost per student or patron, regardless of category of service.  While simple in concept, the proposal rapidly becomes more complex when adjustments are proposed to provide greater fairness based on factors such as school size, school age or construction parameters, geographic location, needs of new schools, etc.  Even greater problems are encountered when dealing with schools or libraries that obtain some services directly and other services through consortia (i.e., must a school give up some of its per student cap for the benefit of its consortium?).  Given the FCC’s focus on the power of consortia to lead the cost-effective expansion of broadband on a regional or statewide basis, this is a serious drawback.

    Another option discussed is the possibility of eliminating the discount matrix altogether, replacing it with a fixed applicant budget to be spent on any eligible service.  Presumably, this would work as a per student cap on total E-rate funding rather than as a pre-discount cap.
  4. Providing more equitable access to Internal Connections.  Suggestions include:
    1. Eliminating the 2-in-5 rule (which has been totally ineffective).
    2. Establishing a rolling funding cycle which would give all applicants access to Priority 2 funding over time.
    3. Replacing the current priority systems with a “whole networks” approach.

Lowering New Build Costs and Identifying Additional Funding:

The final subsection of the broadband portion of the NPRM addresses additional funding opportunities for meeting the broadband deployment goals.  It solicits comments on three basic approaches, including:

  1. Public-private partnerships.  The NPRM asks what “steps the Commission could take to improve the private sector business case for deploying fiber to schools and libraries, or otherwise expanding connectivity, and thereby reduce the need for E-rate funding?”
  2. Coordination with other universal service programs.  Specifically, because the Connect America fund involves broadband service obligations of carriers receiving high-cost support, the NPRM asks how to minimize the overlap between the two programs while extending the reach of both.  Not discussed is the possibility of coordinating the low-income Lifeline program to support off-campus wired or wireless Internet access for low-income students or patrons.
  3. Additional funding of proposed goals through E-rate.  The NPRM raises the possibility of “refocusing or reprioritizing” funds within the Universal Service Fund as a whole.  Alternatively, as mentioned above, this is the one small section that seeks comments on the need to temporarily or permanently increase funding, perhaps targeting the increase to only one category of applicants such as regional consortia.

As we have indicated in our E-Rate 2.0 NPRM articles to date, and as we’ll continue to note in forthcoming articles, this NPRM is long on questions and short on specific proposals.  Interested applicants and service providers are encouraged to take an active role in the comment and reply comment process.  Initial comments are due September 16th.

E-Rate Updates and Reminders

FCC Commissioner Nomination Status:

Last week, the Senate Commerce Committee approved the President’s nominee, Tom Wheeler, to serve as the new FCC Chairman.  Final approval now goes to the full Senate which is not expected to act until a Republican nominee for the remaining Commissioner slot is also approved by the Senate Commerce Committee.  As a step in this direction last week, the President nominated Michael O’Reilly for that position.  Mr. O’Reilly, who currently works for the Senate Minority Whip, John Cornyn (R-TX), had previously worked on telecommunications issues for Senator John Kyl (R-AZ) and on the staff of the House Commerce Committee.

Initial Comments on ESL for FY 2014:

Comments on the FCC’s proposed Eligible Services List (“ESL”) for FY 2014 were due last Friday.  As of last weekend, the most interesting comments posted on the FCC website (and there may be more posted early this week), are as summarized below:

  • SECA:
    • Urged the FCC to make telecom “Administrative” fees eligible arguing that most such charges are in fact a necessary component of telecommunications services, and that any additional fees charged for E-rate participation (theoretically ineligible) are minimal.
    • Asked the FCC to rule that equipment installation contracts, negotiated separately from equipment purchases, are eligible.
    • Encouraged the FCC to issue a final order on Public Notice DA 13-592 to resolve the “free” bundled equipment issue.
  • GaggleNet, together with filings from Schoology and a number of Gaggle customers, took issue with the FCC’s plan to clarify and limit the eligibility of web hosting.  Gaggle’s concern is not with the language in the ESL per se, but in the accompanying Public Notice  DA 13-1513 stating:

Therefore, we propose to clarify that eligible features available through a hosted web site are not eligible for E-rate support as stand-alone offerings. In addition, we propose to clarify that applicants may seek E‑rate support for web hosting services purchased from a single provider, but may not seek E-rate support for services purchased from multiple web hosting providers.

FCC Public Comment Schedule:

The FCC currently has four notices out for public comment as per the following schedule:

Notice of Proposed Rulemaking: Modernizing the E-rate Program for Schools and Libraries (FCC 13-100) — see article above
  Release Date: 07/23/2013
  Comment Date: 09/16/2013
  Reply Comment Date:   10/16/2013
   
Revisions to FCC Forms 470 and 471 (DA 13-1590)
  Release Date: 07/17/2013
  Comment Date: 08/16/2013
  Reply Comment Date:   08/30/2013
   
Revisions to FCC Forms 479, 486, and 500 (DA 13-1636)
  Release Date: 07/24/2013
  Comment Date: 08/14/2013
  Reply Comment Date:   08/28/2013
   
Draft Eligible Services List for FY 2014 (DA 13-1513)
  Release Date: 07/03/2013
  Comment Date (last week — see above): 08/02/2013
  Reply Comment Date:   08/19/2013

Early comments on the form revisions were submitted last week by the State E-Rate Coordinators’ Alliance (“SECA”) for both Forms 470 and 471 and Forms 479, 486, and 500.  Most significantly, SECA urged the FCC not to add the proposed large connectivity data table to Block 5 of the Form 471.  SECA argued that: (a) the added data fields would require USAC IT system changes and could delay the opening of the FY 2014 application window; and (b) the data collection revision is premature in light of questions posed in the recent NPRM.

Schools and Libraries News Brief Dated August 2 – Approved Appeals

The SLD News Brief for August 2, 2013, reviews the sequence of events, and the actions an applicant or service provider must take, after an appeal is approved by either USAC or the FCC.

USAC appeal decisions, approved or denied, are communicated by an Administrator’s Decision Letter (“ADL”) and sometimes if a funding decision is approved in part or in full, by an additional Revised Funding Commitment Decision Letter (“RFCDL”).

FCC appeal decisions are first posted on the FCC website in the Daily Digest.  Copies of the appeal decisions are then mailed to the appellants.

The necessary steps to be taken by appellants after successful appeals depend upon the nature of the appeal.  Last week’s SLD News Brief lists the necessary steps for the three most common types of appeals, namely:

  • Funding denials successfully appealed to USAC.
  • Invoice deadline extension denials successfully appealed to USAC.
  • Successful FCC appeals remanded to USAC.
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.