Based on a number of PIA inquiries we’ve seen on FY 2015 applications, there is an indication that USAC is taking a hard look at duplicate services. To be more precise, a “duplicate service” question may actually be addressing one of two distinctly different issues. Redundant products or services are an eligibility issue. Contract awards to two or more vendors for the same service are a competitive bidding issue. It is important not to confuse the two issues.
It is also important to understand that USAC’s PIA review system has been programmed to identify and flag potentially duplicative sets of products, services, and/or vendors. Once an application is flagged, more likely than not, an applicant will receive a “duplicate service” question from a PIA reviewer. Sometimes a simple explanation will resolve the problem.
Duplicate Services:
Fully redundant — or “backup” — products or services are not E-rate eligible. But there are many situations in which two or more of a product or service are required and are eligible. Eligible examples include:
- Multiple circuits (or Internet packages) required to serve multiple locations or to meet aggregate bandwidth requirements. PIA questions on these services can often be addressed with a network diagram.
- The same or similar equipment installed to serve the needs of multiple schools or libraries. The Item 21 Managed Entities section of FY 2015’s version of the Form 471 application should indicate when equipment is duplicated across multiple sites, but greater clarity may be required.
Duplicate Service Providers:
The two-vendor problem stems from the FCC’s 2007 Macomb decision (FCC 07-64) that, only more recently, has been applied more strictly to other multi-vendor situations. In the Macomb case, the applicant had awarded contracts for three T-3 Internet circuits to three separate providers. As far as the FCC was concerned, this was not a duplicate — or actually triplicate — service issue. The applicant needed the aggregate bandwidth of three T-3s. The problem, as seen by the FCC, was that the applicant had chosen three vendors. How, argued the FCC, could three separate bids (and, in this case, at widely disparate prices) meet the most cost-effective requirement of the FCC’s competitive bidding rules?
Following this logic, an applicant’s use of two or more vendors to provide the same or similar products or services may not be a competitive bidding violation if, for example:
- Services are being provided in different geographic areas, each served by a different carrier.
- Contracts for additional products or services were awarded to a different vendor in a subsequent procurement process as the applicant’s needs (e.g., bandwidth) increased — and when the second vendor had made the most cost-effective bid at the later time.
Network Sustainability:
As USAC begins to focus more on “duplicate service,” it’s time to start thinking about updating the E-rate rules. Given the growing criticality of broadband, the FCC needs to consider the importance of network sustainability, not just bandwidth. Path diversification — even vendor diversification — is important. Schools, in particular, need more fail-safe networks, whether supported by E-rate or not. At a minimum, E-rate must explicitly support ring, rather than star, WAN architectures for new or upgraded networks. If E-rate isn’t going to recognize some degree of redundancy as eligible, the effective percentage level of E-rate support of viable broadband networks will be reduced significantly.
One vehicle the FCC has to rethink network design is a set of filings by the New York City Department of Education (“NYCDOE”), including:
- An FCC Request for Review filed by the NYCDOE in January 2014, seeking to reverse a USAC decision to deny funding for one of two Internet services being provided by separate providers; and
- NYCDOE’s comments filed in September 2014 on the FCC’s draft Eligible Services List for FY 2015.
In some ways, given the size of its network, NYCDOE can be viewed as the poster child for network sustainability. Other large networks — be they school districts, library systems, or state and regional networks — have similar reliability issues. NYCDOE, however, points to specific experiences including:
- The complete failure of its network following the 9/11 attack on the World Trade Center in 2001 that knocked out the single Internet provider’s NOC.
- The avoidance of a complete blackout of services during and after Hurricane Sandy in 2012 when one of two Internet providers lost service.
- Ongoing reliability problems, even with two providers, during the 2013-2014 school year resulting in “1,136 system outages that affected 422 DOE school buildings” and “85,355 hours of downtime.”
In its appeal, NYCDOE argues that use of two Internet provider networks was not redundant — both provider’s routes were utilized at 89% capacity each — and that its award of two contracts was the most cost-effective way to achieve the required level of reliability.
Unfortunately, given the current interpretation of E-rate rules, and the need to fully fund its Internet service, NYCDOE has returned to a single vendor Internet contract for FY 2015. How and when the FCC eventually responds to NYCDOE’s appeal and ESL comments will be watched with interest by many in the E-rate community.