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E-Rate Central News for the Week
January 4, 2016

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 website.

Funding Status

Wave 31 for FY 2015 will be released this Thursday, January 7th. Funding for FY 2015 is available for both Category 1 and Category 2 services at all discount levels. As of Wave 30, cumulative funding for FY 2015 was $2.84 billion.

2015 Review – 2016 Preview

As we start the New Year, it is worthwhile to look back on the old year and to plan ahead for the new one. Here’s our E-rate review of 2015 and a preview of 2016. Additional details on 2015 developments, including links to the various FCC dockets, can be found in our E-Rate Weekly News Archive.

Key E-Rate Milestones in 2015:

January
  • 2015 was the kick-off year for E-rate 2.0 following two important FCC Modernization Orders (FCC 14-99 and FCC 14-189) issued in 2014. Because the Form 470 procurement cycle for FY 2015 was well underway, many of the new fiber system options authorized in the second Order would first become effective for FY 2016.
  • January marked the end of term and retirement of Jay Rockefeller (D‑WV), one of the long-time supporters of the E-rate program.
  • The application window for FY 2015 opened January 14th. The revised Form 471, available only for online filing, featured: (a) discount calculation changes for many applicants, (b) new urban/rural designations, (c) more detailed FRN information, and (d) Category 2 budget limitations per school or library.
February
  • USAC began sending out Form 471 Receipt Acknowledgement Letters (“RALs”) for FY 2015. Although the revised Form 471 differed dramatically from the previous version, the RAL format was basically unchanged, thus limiting the amount of new information that could be reviewed or corrected.
March
  • The deadline for submitting FY 2015 applications, originally scheduled to be March 26th, was extended to April 16th, largely at the urging of the larger city school districts experiencing problems completing the new Form 471.
April
  • The Form 471 application window for FY 2015 closed on the extended deadline of April 16th. Early indications suggested a drop in both the number of applications submitted and in the funding requested.
May
  • USAC released its preliminary estimate of FY 2015 demand showing an overall decrease from FY 2014 of over $900 million to an estimated $3.92 billion.
  • Acting in part on a change in reserve accounting instituted in December 2014, the FCC announced that it would carry-forward $1.575 billion in previously unused funds into FY 2015. This roll-over funding, combined with the increased E-rate 2.0 cap on new funds of $3.9 billion, assured full funding for both Category 1 and Category 2 requests for FY 2015.
  • The first funding wave for FY 2015 was released May 21st. This was slightly later than the previous year, but impressive given the extended filing window.
June
  • The FCC released a draft of the FY 2016 Eligible Services List.
  • USAC introduced a new online E-rate portal, the E-rate Productivity Center (“EPC”). Although still under development, EPC is to be the platform on which applicants, consultants, and service providers file E-rate forms and communicate electronically with USAC.
July
  • A revised version of the Form 470 for FY 2016 was implemented on the EPC portal. One significant change is the added requirement to upload RFP documents into EPC as an integral part of the Form 470 filing process.
September
  • USAC announced a “clean up” effort to verify Category 1 data on FY 2015 applications.
  • The FCC released the final version of the Eligible Services List for FY 2016 (DA 15-1012).
October
  • The SLD began its annual fall applicant training workshops, focusing on EPC and the new fiber system options for FY 2016.
  • FCC Chairman Wheeler appointed (or reappointed) twelve members to USAC’s Board of Directors to fill expired or vacant positions. Most importantly for E-rate, this included two reappointments to school positions for Brian Talbott and Daniel Domenech, and a new appointment to the library position for Robert Bocher.
December
  • A new version of the Form 498 for applicants was made available on EPC. As of July 1, 2016, BEAR reimbursement payments will be made directly to applicants. To facilitate electronic payments, applicants will have to provide banking information to USAC by completing a Form 498.
  • A second term for FCC Commissioner Jessica Rosenworcel, a strong E‑rate supporter, was approved by the Senate Commerce Committee.
  • USAC announced that the application window for FY 2016 will be delayed, opening “no earlier” than January 20th, and closing “no earlier” than March 31st.
  • USAC announced that $1.9 billion in carry-forward funding would be rolled over into FY 2016. Potentially, this makes approximately $5.8 billion available to meet FY 2016 demand (see our analysis of supply and demand funding in our newsletter of December 28, 2015).

Anticipated E-Rate Developments in 2016:

2015 was not an easy year for E-rate. 2016 may be harder still.

There are two basic challenges. One is that changes wrought by E-Rate 2.0 continue. There are two specific aspects of this problem to consider.

  1. New fiber options become available for FY 2016 including changes in the handling of special construction charges for dark fiber, the eligibility of “self-provisioned” fiber, installment payments for applicants’ non-discounted portion, and the possibility of additional E-rate discounts when combined with state matching funds — all of which are tied to new procurement requirements and/or are awaiting further clarification.
  2. Applications for Category 2 products and services, limited by five year budgets, are complicated. By our estimate, less than 40% of FY 2015 applicants applied for C2 funding. Those that did not are encouraged to do so in FY 2016, if only to start their five-year budget clocks. Those that did may need to begin managing those budgets (with the assistance of a new tool USAC is expected to introduce later this month).

The EPC portal remains the biggest challenge for 2016.

At the outset, we should state our belief that EPC can and will improve the entire E-rate process. Many have long called for the introduction of an online portal, at least conceptually. Now we’ve got one. What USAC has accomplished, in a relatively short period of time, is impressive.

What remains to be done, however, is significant. Here again, there are two specific aspects of this problem to consider.

  1. One side of the problem is technical. USAC has a long prioritized list of system upgrades that are needed to improve what it already does. The next big addition to system capability is the implementation of a revised version of the Form 471. It is this development that is currently delaying the opening of the FY 2016 application window. The real concern, particularly for larger applicants, is that the EPC version of the Form 471 may be introduced without addressing the other data management issues of the current EPC system (e.g., automated and corrective access to entity data).
  2. User familiarity is the other side of the EPC problem. We estimate that less than 50% of active applicants who filed last year have activated their EPC accounts for the coming year. Even when accounts are set up, much remains to be done to add other users, set permission levels, review account information carried over from FY 2015, etc. — all important things to do before filing Form 470s for FY 2016. Navigating throughout EPC is not always intuitive. There is a learning curve involved. For those prone to procrastination, it is important to understand that:  (a) filing and certifying forms in EPC must be done at the same time, and (b) passwords must be kept current.

It would not surprise us to see the FY 2016 filing window extend well into April.

One other change for 2016 to remember is that BEAR reimbursements will begin to be made directly to applicants rather than flowing through the service providers, as has been the case since 1998. A flash cut to the new direct payment process is scheduled to occur on July 1, 2016. This will affect final BEARs for FY 2015 services. As indicated above, it will also require applicants seeking BEAR reimbursements to file Form 498s (now available through EPC) to provide direct deposit information to USAC.

All in all, this should be another interesting and very challenging year for E-rate. We wish all the best for the New Year!

E-Rate Updates and Reminders

FCC Decision Watch:

The FCC issued its last monthly set of “streamlined,” precedent-based decisions in Public Notice DA 15-1494, including:

  1. Dismissed eight requests for review or waiver, and one petition for reconsideration, for failing to comply with the Commission’s basic filing requirements which, according to a footnote:

    …along with a proper caption and reference to the applicable docket number, require (1) a statement setting forth the party’s interest in the matter presented for review; (2) a full statement of relevant, material facts with supporting affidavits and documentation; (3) the question presented for review, with reference, where appropriate, to the relevant Commission rule, order or statutory provision; and (4) a statement of the relief sought and the relevant statutory or regulatory provision pursuant to which such relief is sought.

  2. Granted:
    1. One request for waiver for an applicant whose bid assessment included a combined price factor for both eligible and ineligible items. The FCC found “…that the applicant would have selected the same vendor if it had excluded the price of ineligible items from the ‘cost’ criterion.”  Note that the rule requiring price to be the most important factor applies only to eligible costs. The price of ineligible components may also be considered, but only as a secondary factor.
    2. One request for review involving the eligibility of an entity.
    3. One request granting additional time for an applicant to respond to a USAC request for information.
    4. One request for a waiver for a late-filed Form 471 submitted within 14 days of the close of the window.
    5. Seven requests for review or waiver for ministerial and/or clerical errors on applicant Form 471s.
    6. Two requests for review of the signed contract requirement, where the Commission found that the applicants did have legally binding agreements in place in lieu of formal contracts.
  3. Denied:
    1. One request for review and/or waiver of an FRN denial broadly characterized as a failure to consider price as the primary factor in the vendor selection process. The actual situation was more complex, with the Commission also finding that the applicant had failed to:  (a) provide notice of a multi-tiered bid evaluation, (b) describe the services sought with sufficient detail, and (c), produce documentation regarding the vendor selection process. One additional problem noted in USAC’s initial denial was that, although the “Form 470 indicates that you were seeking a multi-year contract, your contract does not include a definite end to the number of extensions. Program requirements do not allow contracts with indefinite terms.”
    2. One request for a waiver involving a service that had not been included on the applicant’s Form 470.
    3. Three requests for waiver of the Form 471 filing deadline for applications filed more than 14 days late, not supported by “special circumstances.”
    4. Seven requests for review or waiver filed in an untimely manner (i.e., beyond the 60-day appeal window).
    5. One request for waiver for ministerial and/or clerical errors on a Form 471 for which the applicant did not, in the Commission’s judgement, demonstrate “good cause.”
    6. One request for waiver of a service implementation delivery deadline for which the applicant “failed to demonstrate they were unable to complete implementation on time for reasons beyond the service providers’ control and failed to make significant efforts to secure the necessary extensions in a timely manner.”
    7. Two requests for review involving violations of the 28-day competitive bidding rule.

Form 486 Deadlines for January:

The Form 486 deadline for certifying the start of service (and CIPA compliance, if applicable) is 120 days from the later of the FCDL approval date or the start of service date. January’s deadlines (adjusted to Monday when the 120-day deadline falls on a Saturday) for approved FY 2015 applications are:
                                          Wave 15                01/04/2016
                                          Wave 16                01/12/2016
                                          Wave 17                01/18/2016
                                          Wave 18                01/25/2016
                                          Wave 19                01/29/2016

No S&L News Brief Last Week:

USAC, as has been its tradition during the holiday season, did not publish its regular weekly News Brief last Friday.

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.