As discussed in our newsletter of June 23rd, FCC Chairman Wheeler released a brief Fact Sheet outlining his proposals for modernizing E-rate, first concentrating on support for internal Wi-Fi deployment. More details on prospective changes to the E-rate program are expected to become available at the FCC’s next public meeting on July 11th and in a formal FCC order to follow.
In the interim, we are witnessing a reverse form of lobbying as Commissioners and their staff provide additional information on proposals still under consideration in an apparent attempt to solicit support for their own positions from the E-rate community.
Clarification Rumors:
Based on what we’ve heard from various sources over the past week, here is what the rumor mill is saying about a few of the Wi-Fi issues still under discussion:
- With broader applicant access to funding for internal equipment (now categorized as “Category 2”), will more applicants be subjected to the requirement for approved technology plans? The answer appears to be “No.” The FCC is likely to defer planning to the states and eliminate the E-rate tech plan requirement entirely.
- How will per-applicant Wi-Fi funding be capped? The indication last week was for a five-year, pre-discount, $150/student limitation (and a similar per square foot limit for libraries). But would that be up to $30/student for all applicants each year, or up to $150/student at any time over the five-year span? Based on more recent indications that the FCC would hope to accommodate Wi-Fi funding for 10 million students in FY 2015, the latter option appears more likely. This would suggest that only the higher-discount applicants might be funded in FY 2015 — much the way Priority 2 was funded in the past — and that other lower-discount applicants would have to wait their turn over the remaining four years.
- How much Wi-Fi funding will be available for small applicants? The rumored pre-discount minimum is $6,000 for both schools and libraries. Funding will apparently be calculated on an applicant-by-applicant, not site-by-site, basis.
- How will the discount matrix be changed? The Chairman’s proposal indicated that the discounts for Category 2 will be capped at 80%. We may have to wait for a second order to see if the discounts will change for Category 1 (the old Priority 1). It is not yet clear if the 80% cap means only that 90% is simply being reduced and combined with the existing 80%, or if all other discount levels are being reduced accordingly (apparently another point of dissension among the Commissioners).
Use of GSA Pricing:
One non-rumored clarification last week appeared in an official FCC blog. It addressed the statement in the Chairman’s Fact Sheet indicating plans to “Leverage GSA pricing so schools can buy for less.” The blog noted that the FCC and the General Services Administration (“GSA”) had agreed to work together to establish blanket purchase arrangements (“BPAs”) for Wi-Fi equipment for schools and libraries, and to allow purchases through GSA’s reverse auction platform.
Using the reverse auction platform, a school would put out a bid for equipment on the GSA site. At the end of round #1, the prices bid – or at least the lowest price bid – would be displayed. Higher-priced suppliers would be given the opportunity to adjust their prices downward in subsequent rounds. Ultimately, when no one else lowered the price further, the lowest-priced bidder would win.
The blog contains no indication that applicants would be required to utilize the GSA bidding mechanism, although we could envision a future scenario in which USAC utilized BPA pricing as a cost-effectiveness benchmark.
One other interesting aspect of this blog announcement is the statement that “equipment makes up as much as 80 percent of the total cost of internal network deployment.” This appears to be a direct acknowledgment that (a) the purchase of equipment, and (b) the deployment of that equipment, are two different things. USAC’s current interpretation of Priority 2 contract rules is that an applicant can have only one contract for the purchase and installation of equipment (i.e., if you have one contract for equipment purchases, and one contract for the installation of that equipment, only one contract is E-rate eligible). This interpretation is currently the subject of several pending FCC appeals.