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January 26, 2015


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 (516-801-7810), or through our Contact Us web form. Additional E-rate information is located on the E-Rate Central website.

Wave 38 for FY 2014 will be released on Wednesday, January 28th. Funding for FY 2014 is available for Priority 1 services only. Priority 2 funding is being denied at all discount levels. Cumulative funding for FY 2014 is $2.12 billion.

Wave 80 for FY 2013 will be released on Thursday, January 29th. Funding for FY 2013 is available for Priority 1 services only. Priority 2 funding is being denied at all discount levels. Cumulative funding for FY 2013 is $2.13 billion.

This is the fifth in what we began as a four-part series of articles late last year on Category 2 budget and E-rate application strategies. Given what is known — and unknown — about the Category 2 funding rules and procedures, our objective is to explore how a Category 2 application (or applications) could or should be structured for maximum funding and flexibility. Links to the earlier articles in this series are:
            Part 1:    Introduction to Category 2 budget strategies
            Part 2:    Strategies dealing with eligible project costs exceeding Category 2 budget caps
            Part 3:    Multi-school cost allocation and FRN filing strategies
            Part 4:    Multi-year budget strategies

The first four parts of the series focused on Category 2 equipment purchases. We now turn our attention to Basic Maintenance of Internal Connections (“BMIC”).

Applying for E-rate discounts on basic maintenance services has never been particularly easy, and became less so in FY 2010 when the FCC ruled that “unbundled warranties” were no longer eligible. Thereafter, BMIC was eligible only for “actual work performed,” subsequently clarified to include so-called “break/fix” charges and limited agreements for “software upgrades and patches” and the like. Typically, to apply for a break/fix maintenance service, an applicant would estimate repair/replacement charges on a range of eligible equipment (often located in multiple schools) on a probability basis that considered historical repair experience and the age of the equipment. Assuming that only a portion of the covered equipment would actually fail during a given year, BMIC invoices could be filed against the overall discounted amount as the equipment was repaired and/or replaced.

Theoretically, BMIC remains eligible on the same basis in FY 2015. The new Form 471 Item 21 data requirements for BMIC, however, not only make the application itself more complex, but raise unanswered questions about how USAC will process BMIC invoices.

To understand the issue, let’s use a simple example. Suppose an applicant has $100,000 worth of E-rate eligible equipment located in two schools. Suppose also that the applicant expects that only a small percentage of that equipment will break during the coming year, and budgets $10,000 for break/fix maintenance. In past years, the applicant would have filed a single FRN for BMIC. The FRN would have been for the two schools combined, would have listed all the equipment as a group in a separate Item 21 attachment, and would have requested funding on the entire $10,000 pre-discount amount. Assuming P2-approved funding, invoices could have been filed as services were used up to the funded amount, regardless of which particular piece(s) of equipment failed and in which building the equipment was located.

For FY 2015, however, the new Form 471 requires the applicant to list all the equipment on a line-item basis in Item 21, assigning a portion of the total maintenance estimate to each line. Additionally, assuming a single FRN, each line-item cost must be allocated between the two schools. If we assume, for example, that there are five types of line-item equipment, some in each school, what had been a single estimated maintenance amount for the year now has to be allocated among ten separate “buckets” based on equipment type and school location.

Note that having made this allocation, the FRN as a whole still reflects a pre-discount total of $10,000. The concern, however, is that USAC may treat each individual Item 21 allocation as a maximum BMIC amount for that particular equipment type and school. If, for example, one specific equipment failure during the year results in a $9,000 repair charge, will USAC pay the full invoice (since it’s less than the $10,000 FRN funding cap)?  Or will USAC limit payment on that invoice to the allocated Item 21 amount assigned to that specific equipment in that specific school?

At this point in the application window, we do not know the answers to these invoicing questions. We also do not know how such decisions, based on actual BMIC expenditures, will affect future Category 2 budgets. Our recommendation, at the moment, is to complete Item 21 BMIC allocations in the simplest and most consistent way possible in order to assure that the FRN total is correct and, most importantly, that the application can be successfully filed by the Form 471 deadline. We can then only hope that USAC (and/or the FCC) develops sensible procedures for dealing with BMIC invoices.

As a practical guide to allocating BMIC requests in the application process, we offer the following suggestion and observation:

  1. Using our example above, it appears that the simplest approach — consistent with the Item 21 format, but one that still requires an extra step with the new Form 471 — is to calculate a maintenance-to-cost percentage (10% in this case) and to arbitrarily assign that percentage to each equipment type in each school.
  2. As a matter of curiosity, we took a quick look at several of the very few BMIC applications that have been filed already for FY 2015. What we found was that, rather than providing complete lists of equipment to be maintained, a few applicants grouped equipment types into single line items, at most allocating the total maintenance expense among a couple of schools. In a couple of cases, the list of equipment maintained was relegated to the Narrative section of the FRN. In one other instance: (a) “Quantity” was expressed in maintenance hours, not equipment units; (b) “Make” referenced the “network for entire district;” and (c), “Model” made reference to “no specific item, covers networks as a whole.”  This approach certainly simplifies the application filing process for BMIC FRNs — and the system accepted it!  It remains to be seen if the resulting PIA review process remains equally simple.

One longer-term point to remember regarding BMIC funding is that committed maintenance funds for each school or library are deducted from that entity’s five-year Category 2 budget. To the extent that BMIC funding is not ultimately used, an applicant should file a Form 500 to reduce the committed amount, thus increasing the remaining budget.

FY 2015 Form 471 Application Window:

The FCC Form 471 application filing window for FY 2015 opened on Wednesday, January 14, 2015. It will close at 11:59 pm EDT on Thursday, March 26, 2015.

USAC E-Rate Webinars and Training Videos:

USAC continues to add instructional material to its website covering the E-rate modernization orders and the new forms. USAC has already conducted six instructional webinars on E-rate topics in December and January, all of which are archived on the SLD website.

Form 470 Demonstration    Recorded December 9, 2014
Eligible Services Recorded December 16, 2014
Program Compliance Recorded December 18, 2014
Category Two Budgets Recorded January 6, 2015
Discount Calculations Recorded January 8, 2015
Urban/Rural Tool Recorded January 13, 2015

Even more recently, USAC has begun to post a series of videos covering the various steps required to complete an online Form 471. The following is a list of the five current videos. Additional videos covering use of the Block 4 upload template and completion of the Block 5 Item 21 data have been promised.

Before You Begin
Starting Your Application
Continuing Your Application
Discount Calculations for School Districts
Funding Requests – Key Information

The S&L News Brief for January 23, 2015 reviews the following E-rate database tools that USAC currently provides — or is developing — for online use:

  1. The Data Retrieval Tool (“DRT”) provides detailed information on all funded (and pending) applications. Data is provided by state and funding year since 1998, the start of the program. Those searching for funding histories spanning all funding years may find it easier to use the Funding Quick Search tool that is available in the upper left-hand corner of each state page on the E-Rate Central website.
  2. The Search Commitments tool permits searches for commitment data by funding year, applicant name, city, state, Zip Code, and/or wave number. Search results can be downloaded into a user’s own database.
  3. Form 470 tools can be used to search for and view an individual Form 470 or to search for and capture data from a group of Form 470s.
    1. View a 470 is funding year and applicant specific. Remember that Form 470s for FY 2015 filed before the revised Form 470 was activated late last November are available under the FY 2014 funding year.
    2. Download 470 Information permits downloads of summary data on multiple Form 470s by funding year, posting date ranges, service types requested, and application types. Early-filed Form 470s for FY 2015 will be comingled with other FY 2014 Form 470s (suggestion: search for early FY 2015 Form 470s filed on or after July 1, 2014).
  4. Form 471 tools can be used to search for and view an individual Form 471 or to search for and capture data from a group of Form 471s.
    1. “View a 471” tools are funding year and applicant specific. The FY 2015 version is new. Views for funding years prior to FY 2015, include options to see either the original application or the current (i.e., committed) application. The Security Code Number shown in the search screen is not required. Views for FY 2015 applications are currently available for original completed applications. To see a full version of a FY 2015 application, the various sections of the original display must be expanded.
    2. Download 471 Information is a new application data tool just released in its initial phase for FY 2015. The new tool provides detailed funding data by state, downloadable into seven files by application section. A Phase 2 version is under development to provide a more convenient, DRT-like, interface.
  5. The Search Urban/Rural Status tool permits searches for the urban or rural status of one or more entities based on new Census Bureau definitions. The status of any entity shown as having an “Invalid Address” must be corrected by contacting USAC’s Client Service Bureau (888-203-8100) or overwritten to “U” or “R” during the online Form 471 filing process.
  6. The View FRNs with Extended Deadlines tool shows the new last date to receive services, and the associated last date to invoice, for any FRN approved for the extended deadlines.
  7. Several other less commonly used tools are available in the Search Tools section of the SLD’s website.