News of the Week

USAC released Wave 6 for FY 2019 on Thursday, May 30th.  Funding totaled $38.9 million.  Cumulative funding as of Wave 6 is $788 million.

The FCC has four proceedings underway that will or could affect future E-rate funding.  Recent developments on these issues are discussed below.

Category 2 Funding as of FY 2020:

The most critical issue facing applicants planning for FY 2020 is the availability of funding for Category 2 equipment and services.  In February, an FCC staff report recommended that the FCC continue the 5-year budget approach with Category 2 funding (see our newsletter of February 18th).  In March, the FCC confirmed that 5-year Category 2 budgets started in FY 2016 or later would extend beyond FY 2019 (see our newsletter of March 18th).  What has been missing is a definitive indication of exactly how new Category 2 budgets will be administered in FY 2020 for applicants who either (a) competed their 5-year budget cycles in FY 2019, or (b) never began Category 2 funding.

On May 20th, the FCC indicated that an item had been placed on circulation entitled “Modernizing the E-Rate Program for Schools and Libraries” for review by the Commissioners.  Despite the broad title, we believe the focus will be on Category 2 funding and expect it to be ready for release when supported by at least three Commissioners — hopefully within the month.  It is not yet clear whether this will be a Notice of Proposed Rulemaking (“NPRM”) requiring public comment or an Order (based on public comments initially solicited in 2017).

Potential Cap on Total USF Funding:

Last Friday, the FCC released an NPRM (FCC 19-46) seeking comment on establishing a cap on total funding of the Universal Service Fund (“USF”).  As it currently stands, each of the four USF programs, of which E-rate is one, has its own cap.  The NPRM is meant to provide a “holistic” view of the “consequences and tradeoffs of spending decisions for the overall fund, and more carefully evaluate how to efficiently and responsibly use USF financial resources.”

One proposal under consideration is to set an annual cap of $11.42 billion, equal to the current sum of the individual program caps.  At this level, the cap would exceed the current level of disbursements — $8.33 billion in calendar year 2018.  As such, in the short term, a $11.42 billion cap would likely have little negative impact on any one USF program.  Longer term, however, the move might restrict E-rate funding on any USF program such as E-rate running below its cap.

One specific possibility on which comments are sought would be the combining of the E-rate and the Rural Health Care (“RHC”) program caps.  One justification for the combination is that “both programs promote the use of advanced services to anchor institutions that have similar needs for high-quality broadband services.”  The effective impact of this combination would be to divert funds from E-rate, which has not been fully using its cap, to RHC, for which demand has been outpacing its cap.

Comments on this NPRM will be due 30 days after its publication in the Federal Register.  Reply comments will be due 60 days thereafter.

New Proceeding on Fiber Overbuilds:

As reported in our newsletter of May 27th, three small carriers in Texas have picked up the cudgel of Commissioner O’Rielly’s concern regarding using E-rate funds to support new fiber networks that overbuild existing fiber networks funded in part by the USF High Cost program.  The three carriers filed a Petition for Rulemaking to amend the E-rate rules “to include safeguards which would discourage overbuilding of existing federally supported fiber networks.”

Last Thursday, the FCC issued a Public Notice (DA 19-493) seeking comment on the carriers’ Petition.  Comments are due July 1st; reply comments are due July 16th.

Eliminating Amortization for Special Construction:

Comments and reply comments have already been received on an FCC Notice of Proposed Rulemaking and Order (FCC 19-5) to permanently eliminate a requirement to amortize special construction charges of $500,000 or more (see our newsletter of April 8th).  Whereas we expect the FCC to proceed with its plan to permanently eliminate the amortization requirement, which had been suspended for the past four years, we do note that the proposal was opposed by rural carriers similarly concerned with fiber overbuilds.  The FCC’s new proceeding on overbuilds may slow approval for, and perhaps modify, the non-amortization Order as initially proposed.

Requesting Summer Deferrals on PIA Inquiries:

The summer deferral period began last week on Memorial Day and will continue until the last Friday (September 6) after Labor Day.  Applicants with pending applications, often understaffed during the summer, have the option of handling PIA inquiries as they arise or proactively placing their applications on hold during the summer deferral period.

There are two ways within EPC to initiate a summer deferral period.  One is to select it directly using Form 471 “Related Actions;” the other is to select it as an option during a “Review Inquiries” stage.  As illustrated below, each is a two-step process.

1. Within “Related Actions,” start at the Form 471 page, then select the “Apply Summer or Winter Deferral” option.
   
   
2. Or start with “Review Inquiries” then select the “APPLY SUMMER OR WINTER DEF” button.
   
   

Additional information on the procedures followed by PIA during the summer deferral period is provided in last Friday’s USAC News Brief referenced below.

Note:  Summer deferrals can only be applied at the Form 471 application level, not at the applicant level.  If you need to use this option on multiple applications, be sure to navigate to each Form 471 individually and apply the summer deferral option.

Update on BEAR Notification Letters:

Additional reports were received last week that BEAR Notification Letters are not being mailed as planned.  Although the Client Service Bureau (“CSB”) is currently acknowledging that USAC is experiencing “a system issue with BEAR NLs so no one is receiving them,” this may be a long-standing problem tracing back as far as January.

The absence of BEAR Notification Letters is particularly problematic as Maximus, USAC’s new contractor, works to reduce its inherited backlog of outstanding invoices.  Not being notified when an invoice has been approved is inconvenient.  Not being notified when an invoice has been denied is potentially disastrous if the denial is not recognized until after the deadline for submitting a revised invoice or for appealing the denial.

We noted incorrectly in our previous newsletter that BEAR Notification Letters are supposed to be mailed by USAC to the applicants’ Form 471 contact.  Based on more complete CSB information (shown below) these letters are supposed to be sent to the Form 486 contact — often the same, but not necessarily the same, as the Form 471 contact.  This is the only process where USAC does not send an acknowledgement to the contact person listed on the associated form.  While we understand why USAC issues the BEAR Notification Letter to the Form 486 contact, it would seem appropriate to also copy the contact person on the BEAR.

Applicants awaiting BEAR Notification Letters to close out their invoicing documentation can obtain duplicates via email by contacting the Client Service Bureau (“CSB”) at 888-203-8100 or by creating an EPC customer service case.

Upcoming E-Rate Dates:

USAC’s Schools and Libraries News Brief of May 31, 2019 reviews the process by which an applicant or service provider can return funds to USAC.  With the increased number of Commitment Adjustments (“COMADs”) and Recovery of Improperly Disbursed Funds (“RIDFs”) actions initiated by USAC over the past two years — see our recent newsletter article on Ancient COMADs — the necessity of returning funds to USAC has become unfortunately more common.

Note that USAC no longer accepts paper checks for the return of funds.  The News Brief summarizes the current process for completing a Payment Identification (“PID”) Worksheet and electronically uploading the Worksheet and the appropriate payment information online.

Last week’s News Brief also reminds service providers of the August training sessions in Washington DC and summarizes PIA contact procedures during the summer deferral period (see our discussion above).