News of the Week

Wave 9 for FY 2014 will be released on Thursday, July 10th. Funding for FY 2014 is currently available for Priority 1 services only. Cumulative funding for FY 2014 is $1.22 billion.

Wave 87 for FY 2012 (denials only?) will be released on Monday, July 7th. Priority 2 funding for Priority 2 is available only at 90 percent. Cumulative funding for FY 2012 is $2.87 billion.

Through news releases, blogs, and staff outreach to the E-rate community, the FCC continues to provide additional details on FCC Chairman Wheeler’s proposals to modernize the E-rate program. If all goes as planned, the Commission will vote on these proposals at the FCC’s next public meeting on July 11th. The Chairman’s proposals, concentrating on support for internal Wi-Fi deployment, were first outlined in last month’s FCC Fact Sheet. Other proposal details, albeit unofficial, were discussed in our newsletter of June 30, 2014.

Last week, in an effort to both inform and to gather support of the Chairman’s E-rate proposals, the FCC released:

1. An FAQ blog providing answers to some common questions about the proposals; and,
2. A white paper entitled “Modernizing E-Rate: Providing 21st Century Wi-Fi Networks for Schools and Libraries across America.”  The paper included state-by-state estimates of the number of additional students, schools, and libraries that would receive Wi-Fi funding over the next five years.

Less official information about the Chairman’s proposals, gleaned last week from a series of FCC staff conference calls with E-rate groups, include the following points:

1. The phase-out of E-rate support for “legacy” services will start in FY 2015. We expect that this will include the immediate elimination of support for paging, web hosting, voicemail, and email. Discount rates for all Priority 1 voice service — POTS, cellular voice, and VoIP — will be reduced by 20% in FY 2015 (e.g., 40% drops to 20%,…, 90% drops to 70%), followed by additional 20% reductions in ensuing years until there is no legacy funding for even the highest discount applicants.
2. A draft of the Eligible Services List (“ESL”) for FY 2015, including the above-mentioned legacy service changes, will not be released with the initial modernization order, but should be released for public comment shortly.
3. Pricing transparency will require that actual expenses on supported E-rate services be made publicly available. We see this as a tool to encourage lower pricing of service, in general, and, perhaps, as part of a mechanism to enforce the longstanding Lowest Corresponding Price (“LCP”) requirement.
4. Provisions will be included (and codified) to promote consortium purchases and to accelerate the annual approval of consortium applications.
5. Despite several changes that appear to increase the complexity of the E-rate program, a number of proposals are aimed at streamlining the process, including:
   1. Greater support for multi-year contracts.
   2. Elimination of all technology plan approval requirements.
   3. Easing of the signed contract requirements.
   4. Mandatory electronic filing of all forms.
   5. Limited competitive bidding requirements for certain “business class” services.
   6. Districtwide, rather than site-specific, discount rate calculations.
   7. Adoption of the USDA’s direct certification multipier to calculate discount rates for Community Eligibility Provision (“CEP”) schools.
6. Adoption of a five-year budget cap for Category 2 Wi-Fi services (equipment, installation, and maintenance) with the following characteristics:
   1. A maximum pre-discount budget of $150 per student on a school-by-school basis. (Note: The application filing and documentation requirements of this provision could become quite complex for larger school districts.)
   2. A similar library budget of $1 per square foot on a library-by-library basis.
   3. A minimum $6,000 pre-discount budget for small schools and libraries.
   4. Eligibility of managed Wi-Fi services (within the Category 2 budget).
   5. A reduction in the maximum discount on Category 2 services from 90% to 80%, effectively creating one large discount band for applicants with NSLP eligibility percentages of 50% or more.

Please remember that all this information concerning planned changes to the E-rate program relate to FCC Chairman Wheeler’s proposals. Formal approval of these changes requires a majority Commission vote, followed by the release of an FCC order.

Parties interested in this process should attend or listen to the webcast of this Friday’s FCC public meeting. Under the FCC’s Sunshine restrictions, those still interested in filing statements prior to the public meeting must do so before 11:59 p.m. EDT on Monday.

Assuming approval at the public meeting, the actual FCC modernization order would hopefully be released shortly thereafter. We understand that a draft of the order has been completed, but is subject to change, both before and to some extent after the meeting. Individual Commissioners may also wish to include supporting or dissenting comments.

The FCC has stressed that the initial modernization order is just the start of a multi-step process. Other steps include formalization of the ESL and form revisions for FY 2015, plus a follow-on order more narrowly focused on Category 1 issues. The first order itself is expected to include limited requests for additional public comment on such topics as multi-year contracts, discount rate determinations, and consortia. Additionally, as the details of the initial order become known and are analyzed, we would expect to see public filings seeking clarification and/or reconsideration.