News of the Week

Wave 45 for FY 2016 was released last Thursday, May 4th for a total of $94.3 million. Cumulative national funding through Wave 45 is $2.59 billion. Wave 46 is scheduled to be released earlier this week on Tuesday, May 9th.

Our last three newsletters discussed a series of questions sent to applicants who filed for special construction of lit, dark, or self-provisioned fiber. In many cases, the deadline to submit responses to these questions was extended, albeit after the fact, until Monday, May 8, 2017.

Concerns regarding these questions and a request for clarification were formally expressed to FCC Chairman Pai in a letter dated April 27th from the Schools, Health & Libraries Broadband (“SHLB”) Coalition. The letter reads in part:

The questions ask for information that is irrelevant to determining whether an application meets E-rate requirements and suggests new limitations on funding that were not contained in the 2014 E-rate Modernization Orders, the FCC’s rules, or USAC’s training materials. This new line of inquiry comes after applicants have followed all E-rate procurement rules and guidance, completed the already exhaustive Program Integrity Assurance (PIA) Review process, completed their budgeting processes and, in some cases, already signed contracts and begun to deploy their networks. The request for new and detailed information also adds more delay to an already extremely delayed process. In addition, we are concerned that this latest inquiry may result in attempts—using new guidance previously unknown to applicants—to recoup funds for projects already approved and for projects where the special construction of fiber is already underway.

Suggestion to responders:  In managed fiber cases, applicants are unlikely to know how many strands the vendors intend to deploy as a part of end-to-end services, or what the vendors plan to do with excess strands. If service providers are unwilling to provide the requested information, as many larger carriers are, we suggest that applicants notify USAC of the challenges involved in gathering the vendor information and submit whatever documentation they can. USAC has been reaching out to service providers that are not willing to provide the requested information to the applicants.

Random System Bugs:

As USAC continues to update and improve EPC at least weekly, as can occur with a complex system such as EPC, corrections made in parts of the system may result in unforeseen bugs arising in other parts, often of a seemingly random nature. Here are a few examples of bugs reported by users last week:

1. Disappearing Form 471s. Some Form 471s in progress disappeared from the users’ Task lists, or were on the lists but could no longer be retrieved. The apparent solution — which will become even more difficult as the window deadline approaches — is to recreate the lost Form 471. Applicants doing so have reported that, although the original Form 471 had apparently disappeared, the original FRNs are available to be copied into the new application, saving at least some work for complicated applications.
2. Zeros in PDF fields. Certain PDF versions of draft Form 471s were showing a 0% discount in the FRN calculations and/or zero enrollments in the entity lists. Apparently the EPC applications themselves remained correct but, as a possibly related problem, some certified applications are being listed in the FRN Status Tool with missing dollars in the Original Funding Amount field.
   
   Tip:  If, after completing a funding request the “FRN Calculation” field remains blank (as shown in the following screenshot), try continuing to certification, hitting the back button, and stepping through each FRN to get the FRN Calculation to populate. If this doesn’t work contact the Client Service Bureau to report the issue.
   
   

3. Erroneous Form 498 messages. Some applicants received messages entitled “Why Your 498 ID isn’t Approved Yet,” and explaining what to do next. Many of these applicants reported that their Form 498s had long been approved and, in many cases, had been used to successfully file invoices.  Unless it is your first time filing a Form 498, these messages can be safely ignored.
4. Bogus News feed. A News feed popped up in EPC last Thursday indicating that it was the last day to file a Form 470 for FY 2017 and that the window was set to close on June 1. USAC quickly released a Special Edition News Brief acknowledging the error and reconfirming the closing of the application window on May 11th.

Consortium Discount Rate Calculations:

We received questions this past week concerning the consortium discount rates shown in EPC. In one example, EPC showed:

The two questions in this example were:

1. Why is the the Category 2 discount rate 1% lower than the Category 1 discount rate?
2. Given the 60% phase-down in discounts for voice services in FY 2017, why is the voice discount rate only 58% below the Category 1 discount rate?

The answer in a word is “mathematics.”  The consortium discount rate for any given application is the average of the discount rates for the consortium’s individual members, as calculated by the type of service. Here’s how the math works out for a 10-member consortium shown below:

To answer the two questions, note:

1. The maximum discount for Category 2 is 85%, not 90%. Thus the average Category 2 discount for a consortium containing some of the highest discount members will (except for rounding) be lower than the consortium’s Category 1 discount.
2. The voice discount average is affected by the lower discount members of a consortium. Although the nominal discount reduction for FY 2017 is 60%, no member can have a voice discount lower than 0%. Thus the average voice discount for a consortium containing lower discount members will be higher than the consortium’s Category 1 discount minus 60%.

Note:  Strategically, consortiums would be wise to file separate applications for voice-only recipients. In the above example, with only the six members eligible for voice services, a separate consortium application would result in a 22% voice discount.

USAC CEO Henderson Resigns:

In a surprising announcement, at least with respect to timing, the USAC Board accepted the immediate resignation of Chris Henderson as CEO. The resignation came one week before the close of the FY 2017 E-rate application window and, perhaps more significantly, two weeks before USAC was charged with responding to a letter from FCC Chairman Pai criticizing USAC’s implementation of the EPC system. Ms. Vickie Robinson, VP and General Counsel, was appointed Acting CEO. Craig Davis, VP of the Schools and Libraries Division, remains in direct charge of the E-rate program.

The FCC’s reaction to Mr. Henderson’s resignation was hardly a bland thank you for his service. Instead, Michael O’Rielly, the other Republican Commissioner and critic of USAC and the current E-rate rules, issued the following statement:

The departure of its CEO presents an opportunity for the Universal Service Administrative Company (USAC) to clean up its act. USAC as it has been managed is not sufficiently accountable to the Commission, and is not meeting the needs of universal service stakeholders or the public, who pay fees to support USAC’s operations. Absent significant and timely improvements, I believe that all options should be on the table, including putting USAC’s functions out for contract, as the Commission has done in other circumstances.

We suspect that E-rate is about to become more interesting — probably with changes targeted for FY 2019 or later, but potentially as early as FY 2018.

USAC’s Fund Size Projections for 3Q17:

USAC released its Universal Service Fund Size Projections for the Third Quarter of 2017. Typically, the FCC uses these third quarter projections to set the carry-forward (or “roll-over”) of funds into the next funding year. This year’s projections show $1.264 billion in available funds, down about a third from last year’s $1.9 roll-over. If FY 2017 demand is similar to FY 2016, this would require an increase in USF fee contributions — a sensitive issue for FCC Chairman Pai.

Upcoming 2017 E-Rate Deadlines:

USAC’s Schools and Libraries News Brief of May 5, 2017, provides the following tips for those applicants who have not yet filed their Form 471 applications for FY 2017:

1. Make sure that you can log into EPC to be able to work on a Form 471.
2. Start your Form 471 even if you are not ready to provide funding request details.
3. Wait the full 28 days after filing your Form 470, even if you filed the Form 470 after April 13th.
4. Review the answers to your connectivity questions.
5. Create a contract record for each new contract or legally binding agreement.
6. Ask CSB to create missing entities, if possible, and attach them to your organization.
7. For questions or problems, create a Customer Service case in EPC to provide detailed information and/or seek written responses from CSB.
8. Use the “interim SPIN” (143666666) if USAC has not yet issued a SPIN to your chosen service provider.
9. Take advantage of CSB’s extended service hours (see News Brief).
10. Do not wait until the last minute to contact CSB with questions or issues.