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E-Rate Central News for the Week
February 22, 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 37 for FY 2015 will be released this Monday, February 22nd. Wave 38 will be released on Friday, February 26th. Funding for FY 2015 is available for both Category 1 and Category 2 services at all discount levels. Cumulative funding for FY 2015 is $3.04 billion.

Voice Service Consortium Calculations for FY 2016

Several questions have been received recently concerning the proper way to file consortium applications — and subsequently distribute consortium discounts — for voice services. This is not strictly an EPC issue, but it has become important in FY 2016 because the phase-out of discounts for voice services has reached 40%. In many cases, this means that certain historic members in a voice service consortium would, on their own, receive zero discounts. The key question, therefore, is: Should these “0% discount” members be included in a consortium?

As a preliminary matter — because this will ultimately be important in making the right decision — we need to review how consortium discounts should be distributed. This will not be important in a state network if the state is paying all charges. However, as is more common, if the consortium members are paying their own share of the services, it is important to determine how much of the total discount is attributed to each member. Neither USAC nor the FCC has ever specified a preferred attribution methodology. Although we have seen some consortia apply the same average consortium discount to each member’s share, we believe that the Form 471 certifications require each of the members to receive their proportional share, i.e., with each member’s share reflecting both that member’s usage and its nominal discount. We’ll do our analysis both ways — “equal” and “proportional” — showing why the latter provides a fair result for the higher discount members.

For a detailed explanation of the proper discount allocation process, see our newsletter of September 29, 2014.

For illustrative purposes, we’ll start with a simple example of a consortium comprised of three districts with equal pre-discount voice service usage, and nominal discounts of 40%, 60%, and 80%. If each district were to apply separately, their discounts for voice services would be 40% lower, meaning that the 40% district would receive no discounts on voice services. This is shown below.

Standalone Discounts
  Discount Rate Voice
Usage
Expected
Discount
Regular Voice
District A 80% 40% 10,000.00 4,000.00
District B 60% 20% 10,000.00 2,000.00
District C 40% 0% 10,000.00 -  
  30,000.00 6,000.00

A consortium discount is based on total usage and the average of its members’ discount rates. In this example, there are two questions. First, should District C, which would otherwise receive no discount on its voice services this coming year, be included in a consortium with higher discount members?  Second, does it matter?

In this example, with equal usage, the total consortium discount is the same in either case. With all three districts included, the nominal consortium discount averages 60%. The voice services discount rate would be 20%, and the total discount on usage of $30,000 would be $6,000 — the same total as in the standalone case.

If District C is not included in the consortium, the consortium’s average discount would increase to 70% (or 30% for voice), but total usage would be only $20,000. Again, the total consortium discount on voice services would be $6,000.

That is an interesting result. In this simple example, it means that the total discount doesn’t change, whether District C is included in the consortium or not.

What could matter, when deciding whether or not to include District C, is how the total discount would be allocated to each member. The following two tables show the difference between a consortium with or without District C, using both an equal and a proportional allocation of discounts.

Full Consortium Discount (A-B-C)
Discount Rate District Allocation
Regular Voice Equal @ 20% Proportional
District A 80% 40% 2,000.00 4,000.00
District B 60% 20% 2,000.00 2,000.00
District C 40% 0% 2,000.00  
  6,000.00 6,000.00
Partial Consortium Discount (A-B)
  Discount Rate District Allocation
Regular Voice Equal @ 30% Proportional
District A 80% 40% 3,000.00 4,000.00
District B 60% 20% 3,000.00 2,000.00
  6,000.00 6,000.00

Note that in the "Equal" cases, each member is allocated the same share of the total discount, regardless of the member's own discount rate. If District C is included, it would benefit from the consortium's average discount rate, even though it would not be eligible for any voice discount in its own standalone application.

In the "Proportional" cases, which we believe is the correct way to allocate discounts, the districts benefit from the consortium discount as if they had filed separate applications. District A, with twice the voice discount of District B, gets allocated twice the discount amount. District C, at 0%, gets no discount.

On this basis — and in this simplified case — it would make no difference whether a district with a 0% voice discount was included in the consortium or not. The best choice may depend on other factors such as (a) the difficulty of breaking out voice usage for member(s), or (b) whether other non-voice services are being covered by the same application.

It is important to recognize, however, that the decision to include or exclude 0% discount members in a voice services consortium becomes much more difficult if the usage of each member varies. That level of complexity is beyond the scope of this article, but two general points should be noted:

  1. The greater the usage of the lower discount members (including those with no voice discounts), the greater the total discount (even at a lower rate) to be shared by the higher discount members. This argues for including all members in the consortium application.
  2. Conversely, the greater the usage of the higher discount members, the lower the total discount. This argues for excluding the 0% discount members from the consortium, thus raising the average discount.

Different usage and different consortium configurations result in different discounts, both in total and for each member. It is worth calculating pro forma discounts for all the different scenarios.

Updates on USAC’s E-Rate Productivity Center

State Matching Funding for New Fiber System Construction:

A new provision of E-Rate 2.0, available for the first time in FY 2016, provides up to an additional 10% discount on broadband special construction charges when matched by state funds. Although the FY 2016 application window is now open, neither USAC nor the FCC has yet indicated exactly what type of state funding may be required to qualify for this match, much less which specific state funds have been deemed "approved."

Applicants already working on a Form 471, and expecting to apply for the extra discount, will encounter EPC prompts requesting information about the availability of state (or tribal) matching funds. If an applicant indicates state (or tribal) matching funds are available, EPC will require the dollar amount being matched in the “State/Tribal Match Amount” field and a description of the source of matching funds or a hyperlink to a relevant web page containing match information in the field “Source of Matching Funds”. EPC will also provide the capability to upload any additional documentation regarding the source of the matching funds (if available). Additional information, if necessary, can be provided in a "Narrative" section. Ultimately, a request for an additional state matching discount will be reviewed by PIA.

NSLP Data for Annexes:

An "annex" is a new site designation as of FY 2015. It applies to an instructional site associated with a school, but one that is not recognized as a separate school by its state. Please note:

  1. A school and annex situation applies to what we had often referred to as a multi-location school.
  2. Two buildings associated with a single school located on one campus are considered a single school entity. If the second building is not located on the same campus, but is across a public right-of-way, it is an annex.
  3. A NIF with classroom(s) is not an annex. This is a critical distinction for Category 2 budget purposes. An annex shares the Category 2 budget of its associated school (based on total peak enrollment); a NIF (with or without classrooms) is ineligible for Category 2 funding.

Unless an annex is new, the site probably has its own entity number with separately reported NSLP data. As such, the site was likely ported over into the EPC system as a separate entity from the applicant's FY 2015 application. This has the following implications for NSLP reporting in FY 2016:

  1. Because an annex is no longer to be considered  to be a separate entity, the earlier entity number must be deleted from the EPC system. This can be done only through CSB.
  2. The entity must be added as an annex, which can be done within EPC, for the associated school.
  3. Combined NSLP data for the school and its annex(es) must be reflected in the school's entity profile.

FRN Form 470 Searches:

Each Funding Request Number ("FRN") in a Form 471 application must reference the Form 470 under which that service was procured. The online EPC Form 471 includes a search function to help find the appropriate Form 470 number, and to populate that number into the FRN Form 470 field. Recognize, however, that EPC is new this year. As a result, the search function only works with Form 470s filed for FY 2016 (excluding any “early” Form 470s filed before EPC was implemented last July).

References to earlier Form 470s (e.g., those associated with pre-2016 multi-year contracts) must be entered separately into the FRN Form 470 field. To search for an earlier Form 470, use USAC's Download 470 Information (FY 2015 and prior) tool.

E-Rate Updates and Reminders

FY 2016 Application Window is Open:

The Form 471 application window for FY 2016 opened on February 3rd. The window is scheduled to close at 11:59 p.m. EDT on Friday, April 29, 2016. The entire application process for FY 2016 is being handled through USAC’s new EPC portal with its own learning curve. Please do not wait until later in the window to file Form 470s, update pre-471 EPC applicant profile information (entity, student, connectivity, and contract data), and begin the Form 471.

USAC EPC Webinars:

USAC has scheduled the following series of webinars on the EPC Form 471 filing process. Note that there are two choices of dates for each webinar. Registration is available now on the Trainings & Outreach page of the USAC website.

  • How to Complete Basic and Entity Information to Prepare for Filing FCC Form 471: February 23rd and February 25th
    • Schools and school districts at 1:00 p.m. EST
    • Libraries and library systems at 2:30 p.m. EST
    • Consortia at 4:00 p.m. EST
  • How to Complete Category 1 Funding Requests on FCC Form 471: March 1st and March 3rd at 1:00 p.m. EST
  • How to Complete Category 2 Funding Requests on FCC Form 471: March 1st and March 3rd at 2:30 p.m. EST
  • How to Understand and Complete the Certifications Section, and Complete FCC Form 471: March 8th and March 10th at 1:00 p.m. EST

File Along with Me Updates:

A USAC blog, “File Along with Me,” initiated in early February provides additional information on the application process. Links to last week’s postings are provided below. You can subscribe to the blog by entering your e-mail address on the blog’s home page (under the USAC logo), and confirming the resulting email.

Post No.    Title

  1.       Update Your Organization’s Profile: To Auto-Populate Your Form Information
  2.       Managing Organization Relationships: Manage Hierarchy and Types
  3.       Managing Organization Relationships: Join a Consortium or Add an Annex
  4.       Managing Organization Relationships: Adding a Consultant

Form 486 Deadlines for February:

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. The remaining February-March deadlines (adjusted for weekends and holidays) for approved FY 2015 applications are:
                 Wave 23           02/26/2016
                 Wave 24           03/04/2016
                 Wave 25           03/15/2016
                 Wave 26           03/21/2016
                 Wave 27           03/29/2016

Schools and Libraries News Brief Dated February 19 – Common EPC Questions

The S&L News Brief of February 19, 2016, asks and answers a series of common questions applicants have posed regarding the use of EPC. Many of the answers require calls to USAC’s Client Service Bureau ("CSB") at 888-203-8100 or coordination the with users' Account Administrator.

  1. I want to be set up as the Account Administrator for my organization. What should I do?  Short answer: Call CSB.
  2. My Account Administrator set me up as a user in EPC. Why can't I access any information?  Short answer: You need to set up your password and accept the Terms and Conditions.
  3. My organization type (school, school district, library, library system, consortium, non-instructional facility) is not correct. How can I get it corrected?  Short answer: Call CSB.
  4. I finished entering a contract in my portal but now I can't update my information. What can I do?  Short answer: Contract information cannot be updated; reenter the information as a revised contract.
  5. I tried to start a program form, but I get a message that I have "insufficient access."  What can I do?  Short answer: Contact the Account Administrator to obtain full or partial rights.
  6. I filed an FCC Form 470 but didn't get my Receipt Notification Letter ("RNL") in the mail. What should I do?  Short answer: RNLs are no longer mailed; electronic notifications can be found under the "News" feed.
  7. I want to update my profile information before I file my FCC Form 471. Where do I find the contracts page and the connectivity questions?  Short answer: Follow the links under "Related Actions."
  8. Some of my related entities are missing. How do I get them added?  Short answer: Call CSB.
  9. Why can't I file a program form using the entity number I used last year?  Short answer:  EPC requires a strictly defined structure of parent-child relationships. See additional information in our newsletter of January 11, 2016.

USAC's News Brief includes a "Tip of the Week" to remind applicants "that the remainder of FY 2015 program forms are not filed in EPC."  It refers users to the online forms available in their Apply Online page to file Forms 486 and 472 online, and their Forms page to access printable copies of the Forms 479 and 500. (Type-in versions of pre-FY 2016 forms are also available in E-Rate Central's Forms Rack.)  This Tip is true at the moment, but applicants should remember that FY 2015 Form 472s ("BEARs") filed on or after July, 1, 2016, will have to be filed through EPC. Before doing so, an applicant will have to complete a new Form 498 to provide electronic payment information. The Form 498 is already available in EPC.

 

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.