The FCC released the final version of the FY 2016 Eligible Services List (“ESL”) (DA 15-1012) dated September 11, 2015. For the most part, the final ESL tracks the earlier draft version (see our newsletter of May 25, 2015). As was the case last year, the 2016 ESL itself is in a streamlined, condensed format, and should be read in conjunction with the explanatory Order.
The following changes and clarifications are of note:
- Form 470s and RFPs for Category 1 fiber systems must always cover lit fiber options. The final ESL adds an explicit note requiring that applicants seeking “…bids for special construction of dark fiber or self-provisioned broadband networks must also seek bids for lit fiber service and fully consider all responsive bids.”
- “Self-provisioned” broadband networks are eligible as of FY 2016, subject to certain safeguards. Most importantly, an applicant seeking E-rate support for a privately-owned network must be able to demonstrate that it is the most cost-effective option.
- Funding for a self-constructed network is available only if the system is built and used within the same funding year. Larger applicants with multi-year private network plans presumably will have to request funding in phases, each of which must be shown to be cost-effective.
- The ESL limits eligible “Network Equipment” to “modulating electronics and other equipment necessary to make a Category One broadband service functional.” However, the FCC declined to identify a list of such equipment. To do so, the FCC argued, “could be unnecessarily limiting.” Instead, the FCC indicated that it “will continue to assess the services and equipment sought by applicants and may revisit this issue for future funding years.” In the interim, this argument suggests a broad, rather than a narrow (as many had assumed), definition of eligible Category 1 “Network Equipment.” It will be interesting to see how USAC will interpret this guidance during next year’s PIA review.
- Applicants with existing dark fiber or self-provisioned networks “will not be required to seek new bids for a lit fiber service in order to receive funding to upgrade or refresh their Network Equipment or to re-contract for maintenance and operation contracts.”
- Only “basic” firewall service or equipment is eligible. The FCC explicitly rejected requests to designate all firewall services — or any additional network security services — as eligible.
- Managed Internal Broadband Services (“MIBS”), which became eligible in FY 2015, remains broadly defined as third-party “operation, management, and monitoring” of Internal Connections. USAC has informally clarified that this does not include the Basic Maintenance of Internal Connections (“BMIC”) that is another subset of Category 2 and is subject to separate restrictions. MIBS can, however, cover equipment owned and installed by a third party. As such, the third party would be responsible for the maintenance of eligible equipment leased to the applicant.
- The FCC declined to revise (restore, add, or clarify) other aspects of product and service eligibility including the phase-out of voice discounts, the strict cost-effectiveness of wireless data plans, and redundant services for network reliability. Such changes were deemed “beyond the scope of the Bureau’s authority to annually revise the ESL.”