News of the Week

The FY 2015 application window closed April 16, 2015, and application reviews are underway. Funding waves for FY 2015 are expected to begin next week. Category 1 and Category 2 funding will be available at all discount levels (see the FY 2015 supply and demand analysis below).

Wave 53 for FY 2014 will be released on Wednesday, May 13th. Funding for FY 2014 is available for Priority 1 services only. Priority 2 funding has been denied at all discount levels. Cumulative funding for FY 2014 is $2.20 billion.

Wave 89 for FY 2013 will be released Thursday, May 14th. Funding for FY 2013 is available for Priority 1 services only. Priority 2 funding has been denied at all discount levels. Cumulative funding for FY 2013 is $2.15 billion.

USAC released its preliminary demand estimate for FY 2015 showing total funding requests of only $3.92 billion. The total is down over $900 million from FY 2014. In particular:

1. Category 1 demand for FY 2015 is estimated at $2.25 billion, down from FY 2014’s comparable Priority 1 demand of $2.63 billion. The decline reflects the ineligibility of webhosting, certain telephone service components and most cellular data services, as well as the 20% phase-out of discounts on voice services. Although details are not yet available, the demand for broadband Telecommunications and Internet services presumably rose.
2. Category 2 demand for FY 2015 is estimated at $1.67 billion, down from FY 2014’s comparable Priority 2 demand of $2.19 billion. The decline in Internal Connections requests may be attributed to the narrow eligibility focus on broadband equipment, the five-year Category 2 budget cap, and, possibly, some applicant hesitation in applying for Category 2 funding.

The availability of E-rate funding on the supply side is strong. The most recent quarterly proposal for the Universal Service contribution factor indicates a current annual collection rate of $2.39 billion for E-rate purposes. In addition, under the E-Rate 2.1 Order (FCC 14-189), E-rate collections may be increased up to $3.9 billion for FY 2015 — roughly matching total demand.

For FY 2015, however, there is no need to raise the E-rate collection rate. Late last week, the FCC announced (DA 15-559) that it would carry-forward $1.575 billion in previously unused funding. The “roll-over” amount, plus new funds generated at the current collection rate, totals $3.97 billion — again, enough to cover the estimated demand for FY 2015.

The FCC’s roll-over decision is interesting in two respects, namely:

1. It specifically directs USAC to utilize current contributions for Category 1, and to utilize the roll-over amount for Category 2. The roll-over amount is about $100 million less than the preliminary Category 2 demand, but that figure is likely to shrink somewhat as the Category 2 applications are reviewed. If it doesn’t, the current contribution level is sufficient to fully fund Category 1 and any Category 2 shortfall.
2. The $1.575 billion roll-over amount, detailed in USACs Universal Service projections of the third fiscal quarter of 2015 (also released last week), is unchanged from the surplus estimated as of the second quarter ending December 31, 2014, and a preceding estimate as of November 30, 2014, following the FCC’s issuance of new E-rate reserve funding instructions to USAC. Normally, funds available for carry-forward increase over time, but there have been no significant changes in the past four months. We would expect to see new carry-forward funds begin to build again in the next few quarterly projections to provide additional funding for FY 2016.

Form 471 Certification Deadline:

As announced in the S&L News Brief of May 1, 2015, USAC mailed out almost 2,790 warning letters last week to applicants who had filed timely Form 471s online for FY 2015, but who — according to USAC records — had not yet certified those applications. The list of those who were sent these “Notification of Form 471 with No Certification” letters was apparently compiled at least several days before the mailing and before USAC had finished recording all the paper certifications already received.

Applicants receiving these notification letters, who have already submitted their Form 471 certifications, should do the following:

1. Check the current Application Status on the SLD website. A properly certified Form 471 should be labeled “Certified – In Window” or better (maybe already in “Initial Review”).
2. If the status indicates only “Complete,” call the Client Service Bureau (888-203-8100) to confirm USAC’s receipt of the certification.
3. If in doubt, resubmit the certification.

Note that a more detailed description of USAC’s Form 471 Status Tool is provided in its most recent S&L News Brief referenced below.

Those who have not yet submitted their certifications should do so now. Certifications must be filed on or before May 26, 2015.

FCC Fiber Build Workshop:

The FCC released an initial agenda for the workshop scheduled for May 20th on E-rate funded fiber build projects. The workshop will be held at the FCC in Washington, DC, but will be webcasted. The four key agenda topics will be:

• Overview of the new E-rate fiber construction rules
• Statewide and regional case studies
• School district and local case studies
• Fiber planning tools

USAC Fall Applicant Training:

USAC announced the dates and locations of its fall E-rate applicant workshops last week. As in recent years, there will be eight regional one-day training sessions beginning Friday, October 2nd in Washington, DC. Registration is now open and attendance is building quickly. The full training schedule with registration links is as follows:

The S&L News Brief of May 8, 2015, discusses the use of USAC’s Form 471 Application Status tool. Although the tool can always be used to check the status of an application under review, its two most immediate uses are to:

1. Confirm the certification status of a submitted application (see reminder above).
2. Determine the likelihood of funding approval in an upcoming funding wave, particularly Wave 1 for FY 2015 expected next week. Although an application shown as “Available for Quality Assurance” will occasionally revert to “Initial Review,” the QA status is more often an indication that a Funding Commitment Decision Letter (“FCDL”) is imminent.