News of the Week

USAC released Wave 15 for FY 2019 on Thursday, August 1st.  Funding totaled $69.9 million.  Cumulative commitments through Wave 15 are $1.22 billion. 

The FCC released a draft of the Eligible Services List (“ESL”) for FY 2020 (DA 19-738).  Aside for one key disclaimer, the draft release is a non-event this year.  What may change depends entirely on the outcome of the Category 2 Notice of Proposed Rulemaking (FCC 19-58) affecting the continued eligibility of caching servers, MIBS, and BMIC.  The key paragraph in the draft ESL reads:

Generally, we do not propose substantive changes from the FY2019 ESL.  We note, however, that under the 2014 First E-Rate Order, three Category Two services are currently eligible for support only through FY2019:  managed internal broadband services, caching, and basic maintenance of internal connections.  Therefore, if the Commission does not act before the adoption of the FY2020 ESL on its proposal in the recent Category Two Notice of Proposed Rulemaking to extend the eligibility of these services, then funding for managed internal broadband services, caching, and basic maintenance of internal connections will only be available to entities still operating under their five-year Category Two budget cycles in FY2020.  Accordingly, the proposed FY2020 ESL contains language under the section titled “Eligibility Limitations for Category Two” that explains the conditional eligibility of these services.

Comments on the draft ESL are due September 3rd — coincidentally the same day as reply comments are due on the more important Category 2 NPRM.  ESL reply comments are due September 18th.

The New York Times (and other news media) reported last week that “500,000 Children May Lose Free School Meals Under Tighter Access to Food Stamps.”  The report cited a proposed change in U.S Department of Agriculture (“USDA”) rules recently posted in the Federal Register under which families eligible for the Temporary Assistance for Needy Families (“TANF”) program would not also be categorically eligible for the Supplemental Nutrition Assistance Program (“SNAP”).  The focus on student access to free lunches was triggered by a letter to the USDA from Congressman Robert Scott (D-VA), Chairman of the House Committee on Education and Labor, arguing that the discussion of the proposed rule, as posted, did not include the required Regulatory Impact Analysis regarding the rule’s impact on the National School Lunch Program (“NSLP”).  The letter referenced a phone briefing from the USDA’s Food and Nutrition Service estimating that more than 500,000 students would lose their automatic eligibility for free meals.  Any changes in NSLP eligibility will potentially affect E-rate discounts.  But by how much?

The USDA proposal notes that some TANF benefits are non-cash and/or temporary.  As such, these benefits may be made available to households that do not meet SNAP income or resource tests.  At the present time, however, in an effort to limit state administrative expenses, many states are permitted to automatically qualify all TANF beneficiaries as being eligible for food stamps.  SNAP eligibility is the primary determinant of a school’s use of the Community Eligibility Program (“CEP”) for NSLP purposes.  CEP percentages, in turn, drive the E-rate discount levels of those schools.  To the extent SNAP eligibility is reduced:

• Some schools — those whose percentages of directly certified students would fall under 40% — would no longer be eligible for CEP.  This would mean a return to the more burdensome method of collecting NSLP applications (or doing surveys) to establish their NSLP percentages.  This does not necessarily mean lower E-rate discounts — an estimated 93% of the 500,000 students would still be eligible for reduced-priced lunches — but it would certainly mean more work to justify these discounts.
• Other schools, while remaining within the CEP system, might see their 90% discounts reduced to 80% when their CEP authorizations are renewed (as is required every four years).

There are at least two sections in the USDA proposal that provide some basis for determining which applicants might be adversely affected and to what extent.  The first point to note is that not all states and territories are categorically treating TANF eligibility as being SNAP eligible.  If not, they would not be affected.  The key paragraph on “state” eligibility indicates:

Although the proposal does not list the states, the USDA website does provide a list dated July 2019 of 42 Broad-Based Categorical Eligibility states and territories.  Assuming this to be a more current list, then we can divide the states and territories as shown below.  Applicants in the “Affected States and Territories” — including New York — are those most likely to be impacted by the proposed rule change.

To estimate which applicants might be affected, and to what extent, requires a more detailed analysis.  Broadly speaking, the proposal provides the following information.

In one statewide analysis for New York we conducted, we estimated that the 9% change projected by USDA would mean that approximately 1% of the schools currently using CEP would no longer be eligible and that 3% of the schools, while still eligible for CEP, would experience an E-rate discount reduction of 10%.  The statewide analysis was biased by a significantly large concentration of schools in one major urban city all with high CEP percentages unlikely to be affected by the change.  Considering a smaller base of schools, excluding the large urban city schools, we estimated that 3% of the schools would lose CEP and 10% of the schools would see a discount rate reduction.

 Individual applicants are likely to be affected in the following ways:

• An applicant currently with a directly certified percentage less than 44-45% would be at risk of losing its CEP status at its next CEP renewal point (1-3 years out).
• An applicant currently with a directly certified percentage of 47-52%, now with a 90% discount, would remain in CEP but would be at risk of dropping to an 80% discount at its next CEP renewal point.

At these marginal CEP levels, the USDA’s proposed changes will be important to track.  Comments on the proposed changes are currently due September 23rd (but may be delayed if Rep. Scott’s concerns are addressed).

Upcoming E-Rate Dates:

Comments on FCC’s USF Cap NPRM:

Last Monday was the deadline for submitting comments to the FCC’s NPRM (FCC 19-46) seeking comment on establishing a cap on total funding of the Universal Service Fund (“USF”) and or combining the funding caps for the E-rate and Rural Health Care programs (see our newsletter of June 3rd).  The comments listed below are but a fraction of all the responses.  It’s been a long time since we’ve seen so many comments universally opposed to an FCC proposal.  The major point made in most comments was that placing an overall cap on the USF would lead to competition between the four distinct programs and would create funding uncertainties to the detriment of each program.

American Library Association ("ALA") 
Consortium for School Networking (“CoSN”) 
Council of Chief State School Officers ("CCSSO") 
Council of the Great City Schools 
CTIA – The Wireless Association 
Education and Library Networks Coalition ("EdLiNC")
E-Rate Management Professionals Association (“E-mpa”) 
National School Boards Association (“NSBA”)
NTCA–The Rural Broadband Association 
Schools, Health & Libraries Broadband Coalition ("SHLB") 
State Educational Technology Directors Association (“SETDA”) 
State E-Rate Coordinators’ Alliance (“SECA”)

Reply comments in this proceeding are due August 26th.

GAO Recommends Assessment of E-Rate Support for Off-Campus Internet Access:

The United States Government Accountability Office (“GAO”) issued a report on Internet access and the “homework gap” with the titled recommendation “FCC Should Assess Making Off-School-Premises Access Eligible for Additional Federal Support.”  The report concludes (see Figure 1) that “children ages 6 to 17 in lower-income households are more likely than peers in higher-income households to lack high-speed in-home internet and rely on mobile wireless service.”

The impact of this report on FCC policies is uncertain.  On the positive side, the report contains a response from the FCC to a preliminary draft that states:

On the other hand, the FCC notes that it “…must be mindful of the limits of [its] authority within the Communications Act.”  Specifically, the FCC indicates that its statutory mission is limited “to enhance, to the extent technically feasible and economically reasonable, access to advanced telecommunications and information services for…school classrooms.”

FCC Decision Watch:

The FCC issued another set of “streamlined” precedent-based decisions (DA 19-701) on July 31st.  Applicants facing similar problems as addressed in these decisions may garner useful information by carefully reading the additional FCC explanations found in the footnotes.  The original appeal and waiver requests can be found online in the FCC’s Search for Filings under Docket 02-6.

In last week’s decisions, the FCC:

1. Dismissed:
   1. One Request for Review for failure to comply with the Commission’s basic filing requirements (the applicant had simply submitted a copy of the RFCDL denial).
   2. Four Petitions for Reconsideration — three for not providing additional information; one for being untimely filed (i.e., within 30 days).
2. Granted:
   1. One Request for Review finding that the applicant had properly considered all bids.
   2. One Request for Review affirming the existence of a valid contract initiated by a school district subsequently merged into another district.
   3. Two Requests for Review and/or Waiver accepting the applicants’ cost-allocations for ineligible components.
   4. One Request for Review finding that the applicant had selected the most cost-effective service offering.
   5. Two Requests for Review reversing USAC findings of ineligible services.
   6. One Request for Review granting additional time to respond to USAC’s request for information.
   7. Two Requests for Waiver of the application window for Form 471s filed within 14 days of the deadline.
   8. Two Requests for Waiver involving Form 471 changes involving ministerial and/or clerical errors.
   9. One Request for Waiver wherein the applicant’s bid evaluation had not reflected price as the primary factor but had in fact selected the lowest-cost provider.
   10. One Request for Review accepting a document not “styled as a formal appeal” as a timely-filed appeal.  The FCC found that “the information submitted as part of the [PIA] review process six days after the adverse funding commitment decision was issued should be considered by USAC as information responsive to the rejection of funding and treated as an appeal.”
   11. One Request for Review and Waiver related to a USAC error in posting a revised Form 470.  The revised Form 470 was intended to add a tenth school to a consortium filing.  The FCC found “no reason to believe that the omission of one school from the FCC Form 470 that USAC posted altered the competitive bidding result or to question the reasonableness of the pricing.”
   12. One Request for Waiver for filing an appeal “only a few days late.”
   13. One Request for Waiver of a service delivery deadline required as a result “of time limitations imposed by late-issued funding commitments.”
   14. Five Requests for Waiver of special construction service delivery deadlines for reasons beyond the applicants’ control.
3. Denied:
   1. Three Requests for Review for failure to satisfy the debt/Red Light Rule in a timely fashion.
   2. Two Requests for Waiver seeking invoice deadline extensions.
   3. Nineteen Requests for Waiver for late-filed Form 471s.  In two instances, the FCC rejected arguments that USAC’s system had been unavailable two days earlier (within the 14-day grace period typically granted for late-filed applications).
   4. Ten Requests for Waiver of late-filed appeals or waivers.

USAC’s Schools and Libraries News Brief of August 2, 2019 provides detailed information for applicants needing to file or update a Form 498.  Applicants planning to file BEAR reimbursement forms must have an up-to-date and approved Form 498 on file with USAC to enable direct electronic deposit of BEAR payments.  The Form 498 is not an annual filing requirement.  Once a Form 498 is first filed and approved by USAC, it remains in effect and good unless and until contact information needs to be changed.

The Form 498 requires the following information:

• School or Library Official and General Financial Contact
• Data Universal Numbering System (DUNS) Number
• FCC Registration Number
• Bank account information for direct payments

One critical post-certification step is required when first filing a Form 498.  It requires the filer to upload a copy of the associated bank statement or voided check so that USAC can validate the bank routing number and account number (see the E-File Upload Documentswebpage).

Applicants unsure about the status of their Form 498 can use the FCC Form 498 Status Tool.