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March 30, 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 47 for FY 2014 will be released on Wednesday, April 1st. 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 $2.18 billion.

Wave 85 for FY 2013 will be released Tuesday, March 31st. 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 $2.15 billion.

Educational service agencies (“ESAs”), in one form or another, are deemed eligible to receive E-rate discounts in a number of states. A complete list of eligible ESA types is available by state in USAC’s Eligibility Table for Educational Service Agencies.

One of the vexing problems in the FY 2015 application process has been the proper form of a Block 4 for calculating an ESA’s discount rate. The basic problem, last discussed in our newsletter of March 2, 2015, involves the two types of ESAs and the two types of applications, namely:

  • ESAs with or without their own schools (the latter being NIFs only); and
  • ESA district or consortium applications.

USAC recently adopted new guidelines to calculate ESA discount rates in any combination of the above ESA types or applications. Although these guidelines have not yet been published in an S&L News Brief, the information has been made available selectively to major applicant groups and internally to the Client Service Bureau (“CSB”) and Program Integrity Assurance (“PIA”). The following discussion is based on our understanding of the new guidance.

District ESA Applications:

The E-rate eligibility of an ESA is derived not only from its own schools, if any, but more broadly from the services it provides to its component school districts. As such, USAC indicates that the discount rate for an ESA’s own E-rate services should be determined as if the ESA was a “large district” encompassing its entire service region. The Block 4 should list the ESA’s own sites (NIFs and/or schools) and all of its districts’ schools. If a Block 4 template is used, this would mean that each row would start with the ESA’s BEN under Column A; Column B would list all the ESA entity numbers (NIFs and/or schools) and all the component district school entity numbers. Component school district NIFs will not affect the discount rate and need not be included.

To more clearly distinguish actual ESA sites from the district schools, we recommend — and this is not included in the USAC guidelines — that the ESA sites (NIFs and/or schools) be marked with the “ESA” school attribute code (Column J of the template, if used).

Consortium ESA Applications:

If an ESA is sharing services with its districts, requesting E-rate discounts in a consortium application, the process becomes more complex.

Consortium discount information can be entered online into the Form 471 system on a member-by-member basis, or uploaded in its entirety using a pre-populated Block 4 template. In either case, the system first calculates the individual member district discounts. Second, the system calculates the overall consortium discount rate by averaging the member district discounts.

If an ESA is a consortium member, however, there is a problem. The ESA’s “district” discount cannot be calculated as indicated above because that would mean that the consortium Block 4 would list district schools twice, once as components of the ESA, and again as components of their home districts. USAC’s system — at least as currently configured for FY 2015 — does not permit duplicate entities. A consortium Block 4 must list all member sites (NIFs and schools) — but the system requires each site to be listed only once!

USAC’s solution to this problem is two-fold, depending upon whether an ESA has schools of its own or does not. The solution is not intuitive — so ESA consortium applicants need to be careful — but it does provide a work-around of the online system’s current limitation.

Case #1 – Consortium applications for ESAs with schools:

For an ESA with one or more of its own schools, the solution is to list only the ESA’s own schools and NIFs under the ESA’s BEN. Unlike the “large district” approach discussed above (i.e., including all the district schools), think of this as a “small district” solution (i.e., including only the ESA’s own sites). Listing only the ESA sites under the ESA BEN, and the district sites under the member district BENs, achieves the objective of listing each site only once.

Note that the ESA’s discount calculated as a “small district” (with only its own schools) may be different from the ESA’s discount calculated as a “large district” (with all the member district schools). As a practical matter, assuming the consortium has a number of members, there is likely to be little difference in the overall consortium average discount.

Case #2 – Consortium applications for ESAs without schools:

For an ESA without schools, the Case #1 solution does not work. To calculate an ESA discount, there must be students. USAC’s solution in this case is to add the ESA’s NIF(s) to the entity list of any one of the member districts’ entity list. Since there are no students involved, doing so does not change that district’s discount rate, nor does it change the average consortium discount. The solution is simply a contrivance to avoid a system problem and to make sure all entities are listed somewhere in the consortium Block 4.

Because the addition of an ESA’s NIF(s) to a district’s entity list may not be obvious to a PIA reviewer, USAC’s guidelines ask the applicant to include an explanation in the Narrative section of the first FRN involving services shared by the ESA. The explanation should identify the district used for this purpose and the ESA NIF(s) added. For additional clarity, we again recommend that the ESA sites be marked with the “ESA” school attribute code.

Other Considerations:

It is not yet clear how USAC will review ESA district or consortium applications that do not follow the new guidelines. We would recommend that ESAs, which have not yet filed, use the new guidelines. ESAs, which have already filed applications using a different approach, should adopt a “wait and see” attitude.

Longer-term — meaning FY 2016 and beyond — we believe that USAC will revisit ESA application issues. For consistency, which may mean resolving the duplicate entity problem, we hope that ESA discounts will be calculated the same way for ESAs with or without schools, and/or for district or consortium types of applications. 

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, April 16, 2015. Just think: if USAC hadn’t extended the application window by three weeks, most applicants would have been finished by last Thursday!

“Form 470 But No Form 471” Notifications:

Last week, as it has done in the past after the last day to submit a valid Form 470 for the upcoming funding year (March 19th for FY 2015), USAC began bombarding applicants with “Form 470 but No Form 471” e-mail notifications. If you get one of the notices — and 25 thousand or more do each year — do not panic!

In what we believe is a confusing practice, these notifications are sent to all applicants who filed Form 470s, but who have not yet filed and certified Form 471s, reminding them of the upcoming application filing deadline. Unless read carefully and understood, these letters may make applicants believe that they are about to miss — or perhaps have already missed — a critical deadline. While we encourage applicants to file their Form 471s as early in the window as possible, it is critically important that these applications not be filed until their Form 470s have been posted for at least those 28 days.

Avoiding PIA Cost Allocation Questions:

As a result of changes to the Eligible Services List (“ESL”) for FY 2015, portions of several common telecommunications services are either no longer eligible or remain eligible only at reduced discount rates. In particular:

  • Telephone service components — e.g., voice mail, directory assistance, custom calling services, direct inward dialing, 900/976 call blocking, and inside wire maintenance plans — are fully ineligible and must be cost allocated out of regular local and long distance telephone services.
  • Cellular service components — e.g., text messaging, data (except in unique situations), and the attributed value of “free” or subsidized mobile devices — are ineligible and must be cost allocated out of bundled cellular services.
  • Voice telephone services — e.g., local, long distance, PRI, VoIP, etc. — are eligible, but only at a lower discount rate (minus 20% discount points in FY 2015). To the extent voice services are bundled with other telecommunications services, these must be cost allocated out and treated separately.

We have noticed that funding requests, which include these services but do not show cost allocations, are drawing requests for additional documentation from PIA reviewers. One way to minimize such PIA requests is to include both eligible and ineligible charges and/or to indicate how costs were allocated in the Narrative section of the funding requests.

The S&L News Brief of March 27, 2015, provides ten (or eleven, depending upon how you count) tips for filing a Form 471 application — perhaps not the “top” tips, but worth reviewing nevertheless. They are:

1.   Obtain an FCC Registration Number (FCC RN) if you don't yet have one.

2.   Review your entity name, number, address, and category in the Search for BEN Information tool and change any incorrect information.

3.   Request entity numbers for any new entities.

4.   Locate your NCES or FSCS codes.

5.   Locate the Service Provider Identification Number (SPIN) for each of your service providers.

6.   Check the FCC Form 470 application number(s) you intend to cite on each funding request.

7a.  For libraries - have the required student counts ready.

7b.  For schools - have your demographic information ready for the Discount Calculation section of the form.

8.   Review service eligibility information.

9.   Certify your forms.

10.  Contact the Client Service Bureau if you have questions.