As we start the New Year, it is worthwhile to look back on the old year and to think ahead to the new one. Here’s our E-rate review of 2014 and a preview of 2015. Additional details on 2014 developments, including links to the various FCC dockets, can be found in our E-Rate Weekly News Archive.
Key E-Rate Milestones in 2014:
| January |
- An Official FCC Blog featured an article by Chairman Wheeler entitled “Helping American Students Compete in a Digital World.” The article stressed the FCC’s commitment to President Obama’s ConnectEd initiative to connect 99% of America’s students to high-speed broadband within five years. As a hint to what the year would bring, the blog noted that an “opportunity has opened to use existing funds to immediately begin to expand E-Rate funding targeted to high-speed connectivity to students in schools and libraries.” As it turned out, “immediately” referred to two E-rate modernization orders later in 2014.
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| February |
- After serving eight years as Acting Chief Executive Officer of USAC, Scott Barash — a most dedicated and patient man — departed. Later in the year, Chris Henderson was appointed and confirmed as USAC’s Chief Executive Officer effective September 3rd.
- Expanding upon a small portion of his State of the Union address, President Obama gave a speech reaffirming his ConnectED pledge to connect 99% of America’s students to high-speed broadband within five years. FCC Chairman Wheeler followed up with his own pledge that the FCC would be “applying a business-like approach” to E-rate “allowing us to double, to $2 billion, the money to be spent on high-speed connections...”
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| March |
- The FCC released a Public Notice (DA 14-308) requesting further targeted comments on E-rate modernization. The three most important proposals were to:
- Replace the current two-priority system with a new two-category system, each separately funded.
- Within each category, emphasize broadband funding and phase out support for voice and other “legacy” services.
- Add in an additional $2 billion in funding for FY 2015 and FY 2016.
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| April |
- By April 7th, the end of the accelerated initial comment period on the FCC’s E-rate modernization Public Notice, the FCC had received approximately 150 substantive comments (see our newsletter of April 14, 2014). Less than 100 additional filings were submitted by April 21st, the end of the reply comment period (see our newsletter of April 28, 2014).
- USAC released its preliminary estimate of FY 2014 demand showing an overall decrease from FY 2013 of 3%. The total demand for Priority 1 and at the 90% level for Priority 2 also decreased by 4%. By our estimates, this decline was not enough to permit full funding of Priority 2 applications at the 90% level — a condition subsequently confirmed by the FCC in May and marking the second straight year for which no Priority 2 funding was made available.
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| May |
- To fully meet Priority 1 demand, the FCC rolled over $200 million in previously committed, but unused, funds into FY 2014. USAC released Wave 1 for FY 2014 on May 15th providing more than 14,600 FCDLs totaling over $607 million.
- The FCC released a “Cost Allocation of Bundled Services” Order (DA 14-712, “CA Order”) that revised their prior 2010 Clarification Order regarding cost allocation of bundled services in the E-rate program. As of FY 2015, the Commission will again require E-rate recipients to cost allocate ineligible components (e.g., end-user devices) that are bundled with eligible products unless those ineligible components qualify as “ancillary.”
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| June |
- FCC Chairman Wheeler released a Fact Sheet and supporting documents laying out his proposed framework for E-rate modernization. A heavily politicized vote on the new Order was set for the FCC’s July 11th public meeting.
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| July |
- The FCC approved the E-rate modernization Order at its July 11th public meeting and released a two-page overview. The vote was split 3–2 along party lines. The full E-rate modernization Order (FCC 14-99) was released July 23rd (see our summary in our newsletter of July 28, 2014, and additional detail in subsequent newsletters).
- Included with the E-rate modernization Order was a Further Notice of Proposed Rulemaking seeking comment on future funding needs and on several other issues not fully addressed in the July Order (see our newsletter of August 4, 2014).
- Funding Commitment Decision Letters continued to be issued at a far more rapid pace than seen in recent years. At the July meeting of the USAC board, the SLD emphasized they were trying to issue decision letters for all workable applications by October 1. The July E-rate modernization order stated that the goal for FY 2015 would be to have all decision letters on workable applications issued by September 1.
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| August |
- The FCC released a Public Notice and draft of the Eligible Services List (“ESL”) for FY 2015 (DA 14-1130).
- Additionally and tangentially related to E-rate, the FCC released the Tenth Broadband Progress Notice of Inquiry (FCC 14-113) seeking comments on whether the FCC should increase its broadband speed benchmarks. The Notice also welcomed “suggestions for other data sources or ways we can improve our data collection and analysis of broadband availability to elementary and secondary schools and classrooms.”
- The FCC granted an important petition for reconsideration (DA 14-1188) in a case involving a potential violation of E-rate’s competitive bidding rules by considering the price of both eligible and ineligible items as a single evaluation criterion. The FCC’s decision helps clarify how an applicant can consider both eligible and ineligible costs, albeit weighted differently (see our newsletter of August 18, 2014).
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| September |
- The FCC issued a Public Notice (DA 14-1330) announcing a new procedure designed to streamline the release of routine decisions on requests for review (i.e., appeals), requests for waiver, and petitions for reconsideration. The new process involves both E-rate and other universal service program decisions.
- The SLD began its annual fall applicant training workshops, focusing on the E-rate modernization Order and the revised set of E-rate forms.
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| November |
- The FCC released a Public Notice (DA 14-1556) finalizing the highly-condensed Eligible Services List (“ESL”) for FY 2015. For the most part, the final order adopted the revised ESL as initially drafted (see our newsletter of August 11, 2014).
- Revised versions of the Form 470 and Form 471 were approved by OMB. Both forms must be filed online (although paper certifications will continue to be accepted in FY 2015). The transition to the new Form 470 took place on November 20th. The new online Form 471 will become available when the FY 2015 application window opens on January 14th.
- The U.S. Department of Agriculture issued a memorandum containing Updated E-Rate Guidance for Schools Electing Community Eligibility. The memo summarizes the new E-rate modernization rule permitting the use of the CEP multiplier (currently 1.6x) to calculate the number of eligible students in a school, or group of schools, providing free meals under the Community Eligibility Provision (“CEP”).
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| December |
- The FCC approved and released a second E-rate modernization Order (FCC 14-189) raising the annual E-rate funding cap to $3.9 billion and instituting several program changes to spur fiber optic deployment (see our newsletter of December 22, 2014). The vote was again split 3–2 along party lines.
- Senator Jay Rockefeller (D-WV), one of the long-standing supporters of the E-rate program, gave his farewell address on the Senate floor. He will be retiring next month at the end of his term and will be sorely missed.
- The FCC issued new E-rate reserve funding instructions to USAC designed to more tightly limit reserves for pending applications, undisbursed funds, and appeals. Shortly thereafter, USAC updated its projection of funds available for roll-over to $1.575 billion, as of November 30, 2014. Total funding availability for FY 2015 will not be announced until later this spring following USAC’s release of preliminary demand figures, but is expected to be in excess of $5 billion — enough to provide significant funding for Category 2.
- USAC activated its new online urban/rural lookup tools in the Search Tools section of its website (see our newsletter of December 29, 2014).
- USAC announced that the FY 2015 application window would open on January 14, 2015, and will close on March 26, 2015. Applications must be submitted electronically on the revised Form 471.
- USAC augmented its annual in-person trainings with several webinars and “how to” video clips to try to maximize the education of stakeholders about the new E-rate program.
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Anticipated E-Rate Developments in 2015:
2015 is going to be an interesting and challenging year for E-rate. The two E-rate modernization orders — which we’ve designated “E-Rate 2.0” and “E-Rate 2.1” — will fundamentally change the nature of E-rate. To some degree, this will mean abandoning eighteen years of precedent and addressing a host of new questions.
One common sentiment we’ve heard from E-rate veterans is that 2015 may be like 1998, the start of the E-rate program. Unfortunately, this is unlikely to be true. E-rate’s first year or two was characterized by a degree of procedural flexibility. The early goal was to get funding started. More recently, the E-rate process has focused increasingly on strict enforcement of ever tightening rules or “clarifications,” too often applied retroactively.
From an applicant perspective, the E-rate modernization rules do contain a few simplifications (e.g., the elimination of a technology plan requirement). But more broadly, the new rules are more complex and contain numerous ambiguities and uncertainties concerning their interpretation and administration.
An early word of warning to applicants: Do not wait until the final days of the FY 2015 application window to begin preparing your online Form 471s. Block 5 funding requests, in particular, now require extensive Item 21 detail on the services being requested and on the exact entities using those services. Previously, Item 21 attachments could be prepared and submitted separately in a variety of formats. This is no longer the case. Item 21 data is now highly structured and must be included in the application itself. Without this Item 21 data, applications cannot be submitted.
And one later word of warning: Some of the recent changes included in the E-Rate 2.1 Order providing more flexibility on fiber connectivity — including dark fiber special construction, self-constructed fiber, and non-discounted installment payments — apply only to FY 2016, but entail special requirements that must be met during the pre-FY 2016 procurement stage.
It bears repeating: This should be a very interesting and challenging year for E-rate. We wish all the best for the New Year!