Upcoming E-Rate Dates:
| November 29 |
Form 486 deadline for FY 2019 funding committed in Wave 15. More generally, the Form 486 deadline is 120 days from the FCDL date or the service start date (typically July 1st), whichever is later. Other upcoming Form 486 deadlines are:
Wave 16 12/06/2019
Wave 17 12/13/2019
Wave 18 12/20/2019
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| December 11 |
USAC webinar “Preparing for FY 2020.” |
| January 10 |
Estimated end date of the administrative window for FY 2020, the period in which applicants can — and should — update entity data in their EPC accounts. Once the administrative window is closed, EPC entity data will be locked for the duration of the FY 2020 application window. For details, see USAC’s Schools and Libraries News Brief of October 11, 2019. |
LCP Requirements and Category 2:
E-rate rules require that service providers charge applicants no more for their services than they would charge other commercial customers in “similarly situated” situations. Formally, this limits service providers to charging no more than the “Lowest Corresponding Price,” typically abbreviated as “LCP.” Service providers, not applicants, bear the responsibility for complying with the LCP requirement.
Historically, the LCP requirement has been discussed largely with respect to Category 1 telecommunications carrier charges, but the rule has always applied to all E-rate services. Recently there has been an indication that USAC has begun applying the LCP rule to Category 2 pricing as well. Specifically, we understand that USAC has been holding up SPI and BEAR invoices on certain equipment provided by CDW-G (SPIN 143005588) as a result what we believe to be LCP concerns.
CDW-G, to its credit, has begun reaching out to its E-rate customers with the following message:
CDW-G prides itself on offering the highest quality service and highly competitive prices to our E-rate customers. During a review of our pricing to certain E-rate customers, CDW-G discovered a pricing error that caused us to overcharge you for one or more items. If you have not yet been invoiced, your invoice will reflect the correct, lower price. If you have already been invoiced, CDW-G will be issuing you a corrected invoice that identifies the item(s) affected by the error and the amount by which you were overcharged. If you have already paid the affected
invoice, you will also receive a refund in the appropriate amount.
We deeply regret this inconvenience to our customers and are committed to making it right.
You may be contacted by the Universal Service Administrative Company (USAC) with regard to this adjustment. We have been working very closely with USAC as we make the adjustments to ensure that our customers’ E-rate invoices can be processed as expeditiously as possible.
Should you have any questions about the pricing adjustment, please contact your CDW-G Account Manager. Should you have any questions about USAC correspondence or processing of an invoice submitted to USAC, please contact USAC directly.
Although LCP compliance is a service provider responsibility, non-LCP pricing may affect applicants as well. Consider the following example:
Applicant A, with a 60% discount, buys equipment from vendor B at a cost of $1,000 and files an E-rate application, initially approved by USAC for a $600 discount. Normally, invoicing would proceed as follows:
- With BEAR invoicing, A pays B $1,000 and seeks reimbursement from USAC of $600; or
- With SPI invoicing, A pays B $400, and B invoices USAC for $600.
Suppose, however, that USAC subsequently determines that the appropriate LCP price of the equipment is really $900, i.e., 10% less. As a result, USAC processes the BEAR or SPI invoice, but pays out only $540.
Question #1: How does applicant A make out in this situation? Either:
- With BEAR invoicing, A receives a $540 reimbursement from USAC. A’s net non-discounted cost at this point is $460, not $400. Assuming the applicant notices the short payment on the BEAR, however, applicant A may seek recovery from vendor B. Ideally, A should recover $100 from B — the $60 BEAR reduction and the extra $40 it would have paid on its non-discounted share.
- With SPI invoicing, B receives the $540 from USAC, but A is not notified. At this point, vendor B has received the $540 from USAC and the original $400 from applicant A for a total of $940 — not the corrected $900 LCP price. Ideally, B should return $40 to A.
Question #2: Will USAC step in to make sure that A’s final non-discounted share is only $360, i.e., 40% of the total $900 LCP price? That’s unlikely; from USAC’s perspective, its sole administrative responsibility is to pay only the proper discount on the LCP price. Any adjustments to the customer’s original purchase price is deemed a separate vendor-to-applicant issue.
Whatever created the original pricing error, CDW-G’s message indicates that it plans to make its customers whole. In doing so, hopefully CDW-G will have set an industry-wide precedent for dealing with any future E-rate LCP issues. We commend CDW-G for notifying its customers of the problem and explaining the process they will use to make their customers whole.
FCC Adopts USF National Security Rules:
Last Friday, the FCC adopted an Order barring the use of Universal Service Fund (“USF”) subsidies to fund equipment and services from companies deemed to provide a national security risk. At the outset, the Order would bar funding for Huawei and ZTE equipment (see FCC News Release-1). The full Order, when released, is expected to track closely with the draft order circulated late last month. The Order will become effective as of its publication in the Federal Register. The FCC also adopted a Further Notice of Proposed Rulemaking requiring carriers to remove and replace existing equipment provided by these “covered” companies.
As discussed in our newsletter of November 4th, the prohibition on the use of USF funding for identified services applies to all Universal Service programs, including E-rate. The most substantial impact will be on telecommunications carriers subsidized through the Connect America (or High Cost) program, particularly rural wireless carriers planning to construct new 5G cellular networks.* As we have found, there has been only $2-3 million in Huawei-branded equipment and services funded by E-rate over the past three years. What is not known is the extent to which prohibited components, also covered by the Order, are imbedded in other manufacturers’ equipment. Hopefully, when we see how the Order will be implemented for E-rate purposes, applicants will be able to rely on service provider certifications to ensure compliance.
FCC Proposes New Suspension and Debarment Rules:
The FCC also initiated a rulemaking last week to adopt “new procedures to provide the agency with broader and more flexible authority to promptly remove bad actors from participation” in the USF and other FCC programs (see FCC News Release-2). USF programs currently operate under FCC-specific suspension and debarment rules covering a rather narrow range of conduct effective only in cases of civil judgements or convictions. The proposed new rules would cover a broader range of misconduct and would give the FCC more flexibility to act expeditiously.