News of the Week

Wave 31 for FY 2015 will be released this Thursday, January 7th. Funding for FY 2015 is available for both Category 1 and Category 2 services at all discount levels. As of Wave 30, cumulative funding for FY 2015 was $2.84 billion.

As we start 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 2015 and a preview of 2016. Additional details on 2015 developments, including links to the various FCC dockets, can be found in our E-Rate Weekly News Archive.

Key E-Rate Milestones in 2015:

Anticipated E-Rate Developments in 2016:

2015 was not an easy year for E-rate. 2016 may be harder still.

There are two basic challenges. One is that changes wrought by E-Rate 2.0 continue. There are two specific aspects of this problem to consider.

1. New fiber options become available for FY 2016 including changes in the handling of special construction charges for dark fiber, the eligibility of “self-provisioned” fiber, installment payments for applicants’ non-discounted portion, and the possibility of additional E-rate discounts when combined with state matching funds — all of which are tied to new procurement requirements and/or are awaiting further clarification.
2. Applications for Category 2 products and services, limited by five year budgets, are complicated. By our estimate, less than 40% of FY 2015 applicants applied for C2 funding. Those that did not are encouraged to do so in FY 2016, if only to start their five-year budget clocks. Those that did may need to begin managing those budgets (with the assistance of a new tool USAC is expected to introduce later this month).

The EPC portal remains the biggest challenge for 2016.

At the outset, we should state our belief that EPC can and will improve the entire E-rate process. Many have long called for the introduction of an online portal, at least conceptually. Now we’ve got one. What USAC has accomplished, in a relatively short period of time, is impressive.

What remains to be done, however, is significant. Here again, there are two specific aspects of this problem to consider.

1. One side of the problem is technical. USAC has a long prioritized list of system upgrades that are needed to improve what it already does. The next big addition to system capability is the implementation of a revised version of the Form 471. It is this development that is currently delaying the opening of the FY 2016 application window. The real concern, particularly for larger applicants, is that the EPC version of the Form 471 may be introduced without addressing the other data management issues of the current EPC system (e.g., automated and corrective access to entity data).
2. User familiarity is the other side of the EPC problem. We estimate that less than 50% of active applicants who filed last year have activated their EPC accounts for the coming year. Even when accounts are set up, much remains to be done to add other users, set permission levels, review account information carried over from FY 2015, etc. — all important things to do before filing Form 470s for FY 2016. Navigating throughout EPC is not always intuitive. There is a learning curve involved. For those prone to procrastination, it is important to understand that:  (a) filing and certifying forms in EPC must be done at the same time, and (b) passwords must be kept current.

It would not surprise us to see the FY 2016 filing window extend well into April.

One other change for 2016 to remember is that BEAR reimbursements will begin to be made directly to applicants rather than flowing through the service providers, as has been the case since 1998. A flash cut to the new direct payment process is scheduled to occur on July 1, 2016. This will affect final BEARs for FY 2015 services. As indicated above, it will also require applicants seeking BEAR reimbursements to file Form 498s (now available through EPC) to provide direct deposit information to USAC.

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

FCC Decision Watch:

The FCC issued its last monthly set of “streamlined,” precedent-based decisions in Public Notice DA 15-1494, including:

1. Dismissed eight requests for review or waiver, and one petition for reconsideration, for failing to comply with the Commission’s basic filing requirements which, according to a footnote:

   …along with a proper caption and reference to the applicable docket number, require (1) a statement setting forth the party’s interest in the matter presented for review; (2) a full statement of relevant, material facts with supporting affidavits and documentation; (3) the question presented for review, with reference, where appropriate, to the relevant Commission rule, order or statutory provision; and (4) a statement of the relief sought and the relevant statutory or regulatory provision pursuant to which such relief is sought.

2. Granted:
   1. One request for waiver for an applicant whose bid assessment included a combined price factor for both eligible and ineligible items. The FCC found “…that the applicant would have selected the same vendor if it had excluded the price of ineligible items from the ‘cost’ criterion.”  Note that the rule requiring price to be the most important factor applies only to eligible costs. The price of ineligible components may also be considered, but only as a secondary factor.
   2. One request for review involving the eligibility of an entity.
   3. One request granting additional time for an applicant to respond to a USAC request for information.
   4. One request for a waiver for a late-filed Form 471 submitted within 14 days of the close of the window.
   5. Seven requests for review or waiver for ministerial and/or clerical errors on applicant Form 471s.
   6. Two requests for review of the signed contract requirement, where the Commission found that the applicants did have legally binding agreements in place in lieu of formal contracts.
3. Denied:
   1. One request for review and/or waiver of an FRN denial broadly characterized as a failure to consider price as the primary factor in the vendor selection process. The actual situation was more complex, with the Commission also finding that the applicant had failed to:  (a) provide notice of a multi-tiered bid evaluation, (b) describe the services sought with sufficient detail, and (c), produce documentation regarding the vendor selection process. One additional problem noted in USAC’s initial denial was that, although the “Form 470 indicates that you were seeking a multi-year contract, your contract does not include a definite end to the number of extensions. Program requirements do not allow contracts with indefinite terms.”
   2. One request for a waiver involving a service that had not been included on the applicant’s Form 470.
   3. Three requests for waiver of the Form 471 filing deadline for applications filed more than 14 days late, not supported by “special circumstances.”
   4. Seven requests for review or waiver filed in an untimely manner (i.e., beyond the 60-day appeal window).
   5. One request for waiver for ministerial and/or clerical errors on a Form 471 for which the applicant did not, in the Commission’s judgement, demonstrate “good cause.”
   6. One request for waiver of a service implementation delivery deadline for which the applicant “failed to demonstrate they were unable to complete implementation on time for reasons beyond the service providers’ control and failed to make significant efforts to secure the necessary extensions in a timely manner.”
   7. Two requests for review involving violations of the 28-day competitive bidding rule.

Form 486 Deadlines for January:

The Form 486 deadline for certifying the start of service (and CIPA compliance, if applicable) is 120 days from the later of the FCDL approval date or the start of service date. January’s deadlines (adjusted to Monday when the 120-day deadline falls on a Saturday) for approved FY 2015 applications are:

Wave 15                01/04/2016
Wave 16                01/12/2016
Wave 17                01/18/2016
Wave 18                01/25/2016
Wave 19                01/29/2016

No S&L News Brief Last Week:

USAC, as has been its tradition during the holiday season, did not publish its regular weekly News Brief last Friday.