News of the Week

Funding Status

Wave 12 for FY 2010 will be released on Tuesday, August 10th, for $51.0 million. Funding is being provided for Priority 2 services at the 90% discount level. Cumulative funding for FY 2010 will be $1.065 billion.

Wave 62 for FY 2009 will be released on Wednesday, August 11th, for $11.9 million. Cumulative funding for FY 2009 is currently $2.76 billion, including $319 million for New York. Priority 2 funding is being approved at 78% and above, and denied at 69% and below. We expect the final Priority 2 funding threshold to be 77% and above.

E-Rate and FOIA

We suspect there are frustrations on both sides. From USAC's standpoint, its effort to police the sanctity of the E-rate process is hampered by its lack of enforcement tools (e.g., subpoena power). If it suspects a problem, either through whistleblower calls or its own analysis, it must rely initially on its administrative tools such as Selective (or "Special Compliance") Reviews. While this process plays out, new funding and invoice payments on existing funding are put on hold - sometimes for years.

Fortunately, most applicants and service providers never experience these situations. But those that do fall into "black holes" from which light seldom escapes. It is often difficult to find out what the perceived problems are, much less try to clarify or correct them. Many times, applicants and/or service providers are simply told that their applications and/or invoices are "under review." Other times, applications may be denied — or lead to COMADs of existing funding — based on highly subjective interpretations of E-rate regulations (e.g., the "establishing Form 470 services description is overly broad or non-descriptive and did not allow bidders to ascertain the products or services requested").

In a few cases, parties subjected to what they perceive as a lack of "due process" have sought detailed information from USAC under the Freedom of Information Act ("FOIA"). From what we have seen, these have not been highly successful efforts.

Last week, the FCC ruled on two E-rate FOIA requests. For anyone else contemplating similar strategies, the two decisions are instructive.

The first decision involved a FOIA request made by IBM (FCC 10-138) seeking extensive information about three COMADs (two to IBM and one to El Paso) involving product and service eligibility totaling $19.4 million. The FCC's Wireline Competition Bureau ("WCB") had initially responded to IBM's request by releasing 58 pages of redacted documents. But it withheld 2,584 other pages citing several specific FOIA exemptions, in particular:

Exemption 2: Documents on the administrative record supporting the COMAD that the WCB stated included "detailed information concerning internal processes" which, if released, "would provide a blueprint for those wishing to frustrate or defeat such reviews."

Exemption 4: El Paso's Form 471 Item 21 attachments that the WCB indicated included detailed financial information which, if released, "could cause substantial competitive harm to El Paso."

Exemption 5: Internal e-mails discussing the review of El Paso's applications that the WCB indicated "reflected pre-decisional, deliberative discussions and that the disclosure of these materials would harm the deliberative process."

Exemption 7(e): All USAC letters to El Paso and El Paso's responses that the WCB indicated "contained information concerning investigative techniques and guidelines" that should not be disclosed.

In its appeal to the full Commission, IBM argued that these exemptions do not apply. Specifically:

• Exemptions for "internal personnel rules and practices, applies only to material used predominantly for internal purposes." Much of the information requested included communications between USAC, its contractor, and El Paso.
• Most of the Item 21 attachments were based on information provided by IBM and cannot be deemed "trade secret or commercial or financial information" belonging to El Paso.
• IBM was not seeking "pre-decisional or deliberative discussions," but only those documents that reflect "a formal decision by USAC or the Commission and/or formal policy guidance provided by the Commission to USAC."
• For FOIA purposes, "USAC is not a governmental agency with law enforcement duties."

The FCC's decision agreed only with the release of the Item 21 attachments for which IBM was the service provider. It upheld the WCB on its determination of exempted pre-decisional information. It specifically noted that, although USAC itself was not an agency, USAC administers the E-rate program on behalf of the FCC, and that "the regulatory authority...is ultimately that of the Commission."

The second decision involving the Archdiocese of New York (FCC 10-143) focused, not on the information that could or could not be released, but on the costs of FOIA processing fees. WCB had estimated that the Archdiocese's FOIA request would involve fees of approximately $39,000.

The Archdiocese, which was seeking information to help appeal COMADs of a number of its schools, argued that it could not afford these fees. It sought classification under FOIA rules as an "educational institution" which would qualify for reduced fees. For this purpose, however, the definition of an "educational institution" includes the criterion that the entity "operates a program or programs of scholarly research." In this case, the Commission reaffirmed an initial WCB finding that the Archdiocese's FOIA requests were for purposes other than scholarly research, and that a reduction in fees was not warranted.

Unless further challenged in court, the bottom line for E-rate applicants and service providers is that the information available through FOIA requests may be both limited and expensive. Other solutions to the "black hole" problem are needed.

E-Rate Updates and Reminders

NSLP Income Eligibility Levels Finalized:

The U.S. Department of Agriculture ("USDA") has formally announced that the 2009-2010 Income Eligibility Guidelines ("IEGs") will remain in effect for the 2010-2011 school year (see USDA IEG memo). Previous USDA updates on the delayed publication of the IEGs for this year had simply indicated that last year's IEGs should be used for this year "until further notice." This is that notice!

Status of FCC NPRM on E-Rate Program Revisions:

Comments and reply comments on the FCC's broad E-rate NPRM, on eligible services, and on proposed revisions to Form 470 and 471 have all been filed. Although the FCC staff continues to hold discussions with interested parties, the next step should be an FCC order. Ideally, if an order or orders are to be released in time to affect FY 2011, they should occur before the SLD begins its training sessions at the end of September (see below). The key date to focus on is the FCC's next scheduled open meeting on September 16th.

Form 470 Timing for FY 2011:

In early July, the SLD's online system was updated to make FY 2011 the default funding year. Prior to that time, applicants with long procurement cycles needing to file Form 470s could use the FY 2010 version, using the text fields to indicate that the services requested were to be for FY 2011. The SLD clarified last week that early filed "FY 2010" Form 470s could not be used for FY 2011 tariff or month-to-month services. They could be used only for contracted services.

SLD E-Rate Training for Applicants:

This fall, the SLD will again be holding training sessions around the country. The schedule is as follows:
 

Workshop and hotel registration information is available on the SLD Web site.

Schools and Libraries News Brief dated August 6 - Electronic Banking

The SLD's August 6th News Brief reminds service providers that any payments from USAC as of August 31st must be electronic. USAC estimates that about 1,500 active providers have not yet updated their SPIN information to accept electronic payments. Vendors who don't do this simply won't get paid. Applicants should recognize that blocked payments to their service providers will likely mean delayed BEAR payments to themselves.

USAC is undertaking an extensive outreach effort involving both e-mails and phone calls. Last week's News Brief is a part of this effort. It provided the following tips to vendors needing to update their SPIN information:

• For fastest action, file a revised Form 498 online.
• Be prepared to provide new information that is now being required:
  • Dun and Bradstreet Number.
  • Electronic banking information for other USF programs.
  • Study Area Codes (for High Cost and/or Low Income programs only).
• Monitor your e-mail for USAC inquiries.
• Call or e-mail with questions.