News of the Week

Wave 27 for FY 2016 was released last Wednesday, December 28th for a total of approximately $200 million. Cumulative national funding through Wave 27 is $1.64 billion. Wave 28 is expected to be released this Wednesday, January 4th.

At the New Year, it is worthwhile to look back on the old year and to plan ahead for the new one. Here’s our E-rate review of 2016 and a preview of 2017. Additional details on 2016 developments, including links to the various FCC dockets, can be found in our E-Rate Weekly News Archive.

Key E-Rate Milestones in 2016:

Anticipated E-Rate Developments in 2017:

2016 was a difficult year for E-rate. 2017 may be, at best, only slightly easier.

EPC remains a challenge. Specifically:

1. The system is still under development. Adding new features and fixing bugs is somewhat resource limited as USAC is apparently working in parallel on a new user interface for FY 2018 or FY 2019. Every update to EPC tends to introduce new problems needing to be resolved.
2. New features added towards the end of 2016 often support only the applicant input side of the equation. Additional work is needed to allow USAC to process funding changes on the backend. USAC recently indicated that it was beginning to address the backlog in EPC-filed appeals outside of the EPC system. Backend processing of service substitutions and Category 2 budget changes — difficult enough on the applicant input side — is likely to be challenging.
3. The inability of EPC to handle system data from FY 2015 and earlier years creates year-to-year coordination issues. This is a particular problem when dealing with Category 2 budgets tracing to FY 2015. Note also the “paper” workaround solution implemented to deal with pre-FY 2016 Form 500 changes (see below).
4. EPC’s entity structure enforces strict parent-child relationships, many remaining unresolved even after the FY 2016 application cycle. USAC guidance is still needed to deal with Education Service Agencies (“ESAs”) without schools and library systems without libraries, and with numbered entities supposedly being transformed to unnumbered annexes.
5. Consortium and library Form 471 applications are dependent upon entity data embedded in the EPC accounts of their associated schools and school districts, some of whom do not apply for E-rate in their own right and have little incentive to use EPC.

The last two EPC entity problems are expected to delay the FY 2017 application window. An earlier announcement from USAC indicated that the FY 2017 application window will be no earlier than February-March, but that timetable now appears optimistic. At best, we would envision the following schedule:

1. USAC completes its review of most “workable” FY 2016 applications by the end of this month, at least to the extent that applicant entity data can be validated.
2. USAC uploads validated entity data back into the school and school district EPC profiles. As a part of this process, USAC plans to reach out to those applicants whose profiles may be changed by these updates.
3. Applicants will be given a period of time — most likely at least the month of February — to review and update their school entity profiles.
4. USAC will then “lock down” entity profiles. This is likely to occur roughly coincident with the opening of the FY 2017 application window. Locking down the entity data will permit consortia and libraries to work on their applications independent of changes in the underlying school data. As a result, we expect that a second window close for consortia and libraries will not be needed this year.
5. If USAC can stick to this type of schedule, the application window could likely open for all applicants in early March and close in early May.

Timing is also an issue for applicants seeking discounts on new dark or self-provisioned fiber systems. Although we have seen some approvals and denials on FY 2016 fiber applications, additional decisions on currently pending applications will give everyone more experience on what it takes to competitively bid — successfully — on such systems. Such lessons, even if learned, may come too late for many applicants seeking new fiber system support for FY 2017. The safest strategy at present is to apply for lit fiber.

Applicants who received, or may yet receive, special construction funding for fiber systems in FY 2016 are facing a June 30, 2017, deadline for making those circuits operational. If needed, a twelve month extension of the “lighting” deadline can be requested from USAC. Preferably, although there is currently no such rule, requests for extensions should be made by June 30th.

The biggest unknown for 2017 is the E-rate impact of the reconstituted FCC under the new Republican Administration. At a minimum, this will mean a new FCC Chairman and a three-to-two majority of Republican Commissioners. As noted in our newsletter of November 14th, both current Republican Commissioners had cast dissenting votes on the two 2014 E-rate Modernization Orders. Although we expect E-rate to remain a popular and viable program, the new FCC might decide roll back some of the recent changes, including the yet unused extra funding. As we suggested in our November newsletter, high discount urban applicants in particular may want to accelerate their E-rate projects for FY 2017.

All in all, this should be another interesting and very challenging year for E-rate. We wish all the best for the New Year!

Form 500s, SPIN Changes, and Service Substitutions:

Three new features have been added to EPC, all accessed from the top right-hand corner of the applicant’s Landing Page.

1. FCC Form 500s
2. SPIN Changes
3. Service Substitutions
   
   

The Form 500 appears to have been rushed into production, perhaps because the OMB approval of the previous paper version of the form expired December 31st. We expect to see some changes in the EPC version of the Form 500 early this year. Users of the new Form 500 should note the following:

1. At first glance, the EPC version appears to work only for FY 2016 (and prospectively for FY 2017). Early on in the form creation process you get a question on the use of the Form 500 for FY 2015 or earlier:
   
   
   
   There appears to be no choice of doing anything for FY 2015 because the “Yes” button is grayed out. Although not intuitive, you must first deselect “No” by clicking the green “No” button.
   
   
   
   Now you can click the “Yes” button, bringing up:
   
   
   
   To make any changes involving FY 2015 or earlier, therefore, you have to complete the OMB-expired paper Form 500, save it as a PDF, and upload the completed form into EPC (perhaps a technical workaround of the OMB expiration problem). A convenient “type in” version of the Form 500 is available in E-Rate Central’s Form Rack.

2. The Form 500 can be used to make a number of changes to approved services. As implemented within EPC, the specific changes must be selected using a series of Yes/No buttons.
   
   
   Tip: You must provide responses to each option to proceed to the next screen.
   
   Several of the notations associated with the various choices of purpose do not appear to be correct and may be subject to change. In particular, as flagged above:
   1. Properly bid recurring services contracts may contain provisions for extension.
   2. The critical date for lighting new fiber circuits is June 30th, the end of the funding year, not September 30th, the Last Date to Receive Service for other non-recurring services. USAC has been authorized to grant one year extensions of the June 30th fiber lighting requirement, but we have yet to see any USAC or FCC guidance regarding the due date for requesting such extensions. In the absence of such guidance, we would recommend that such requests be made on or before the end of the funding year on June 30th.
   3. Cancellation of one or more FRNs should be unrelated to the September 30th service delivery deadline.

The new SPIN Change and Service Substitution features are more straight-forward. When starting either process, an early first step is to select the FRN to be changed, either by searching for a specific FRN or by selecting it from a list of the applicant’s FRNs. Although the search option appears first, an applicant with a short list of FRNs will find it easier to simply select the FRN in question and click the “Add (1) FRNs” button.

Upcoming 2017 E-Rate Deadlines:

FCC Decision Watch:

The FCC issued two district-specific appeal decisions last week, as well as its regular month end set of streamlined decisions.

The most interesting decision was the denial of a request by Harrisburg CSD (DA 16-1464) to avoid payment of $2.89 million, the remaining share of a $5.05 million E-rate fraud case initially uncovered by the district itself. The case involved payments for services not received. The undisputed fact was that the district’s IT director had been bribed by the service provider to falsely certify the provision of services — a situation subsequently uncovered and reported by the district. As a result of this crime, two individuals were sentenced to prison and, together with a third participant, ordered to pay a total of $2.16 million in restitution. USAC sought to recover the remaining amount jointly from the district and the service provider. The FCC’s decision:

1. Upheld USAC’s decision to recover the full amount of the restitution shortfall — an amount which the FCC determined had been incorrectly calculated by USAC. To do otherwise, the FCC argued, “…would discourage E-rate applicants from creating internal review systems necessary to prevent waste, fraud, and abuse.”
2. Rejected Harrisburg CSD’s argument that the money should be sought only from the service provider.
3. Noting that full $2.16 million in restitution had not been paid, the FCC directed USAC to calculate the unpaid portion and to add that to the amount due from the district and the service provider.

The other two decisions (DA 16-1465 and DA 16-1448) will be reviewed in next week’s newsletter.

USAC’s Schools and Libraries News Brief of December 30, 2016, discusses the new SPIN change, service substitution, and Form 500 functionality now available in EPC (see more detailed discussion above). The News Brief also mentions the new way to contact the USAC Ombudsman (see also our newsletter of December 26th).

.