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August 4, 2014

Introduction

The E-Rate Central News for the Week is prepared by E-Rate Central. E-Rate Central specializes in providing consulting, compliance, and forms processing services to E-rate applicants. To learn more about our services, please contact us by phone (516-801-7804), fax (516-801-7810), or through our Contact Us web form. Additional E-rate information is located on the E-Rate Central website.

Wave 13 for FY 2014 will be released on Wednesday, August 6th. Funding for FY 2014 is currently available for Priority 1 services only. Cumulative funding for FY 2014 is $1.61 billion.

USAC’s Schools and Libraries Committee approved a recommendation last week to deny all Priority 2 E-rate funding for FY 2014. For this to take effect, the FCC would have to accept the recommendation.

Wave 61 for FY 2013 will be released on Thursday, August 7th. Funding for FY 2013 is available for Priority 1 services only. Priority 2 funding is being denied at all discount levels. Cumulative funding for FY 2013 is $2.09 billion.

Wave 89 for FY 2012 — which may be a denial-only wave — will be released on Tuesday, August 5th.  Cumulative funding for FY 2012 is $2.87 billion.

Accompanying the recently released first E-rate modernization Order (FCC 14-99) was a Further Notice of Proposed Rulemaking (“FNPRM”) seeking comment on future funding needs and on several other issues not fully addressed in the Order. In total, the FNPRM includes almost 130 questions or requests for comments on the five topics discussed further below.

FNPRM comments are due September 15th; reply comments are due September 30th. A subsequent order, based on this FNPRM and expected later this year, may expand or modify provisions of this initial E-rate modernization Order discussed in our newsletter of July 28th.

Future E-Rate Funding Needs:

One of the contentious points in the approval of the Order was the position taken by two Commissioners that the annual cap for E-rate funding needed to be increased, at least to reflect inflation since the program’s inception (i.e., by perhaps $800 million). The FNPRM asks for information regarding:

  1. The gap between current levels of connectivity and the specific targets adopted.
  2. How much money is needed to bridge that gap.
  3. The per-student and per-square-foot budgets adopted.
  4. The sufficiency of funding freed up by the reforms already adopted.
  5. The reduction in E-rate purchasing power since the creation of the program.

Efficiency of Multi-Year Contracts:

The FNPRM poses a number of questions concerning the wisdom of limiting the duration of multi-year contracts. It notes the apparent trade-off between longer-term contracts, presumably with lower prices initially, versus the ability to take advantage of lower-trending prices for broadband service in the future. It asks about alternatives to maximum duration contracts and about the need for longer-term contracts for new fiber connections.

NSLP Data Collection:

The FCC proposes, and the FNPRM explores, a requirement that schools participating in the NSLP program must use state-reported NSLP data, even if this data is typically a year out-of-date. This section of the FNPRM also addresses the proper use of Community Eligibility Provision data and Provision 1, 2, or 3 data.

Encouraging Consortium Participation:

The FNPRM discusses a number of proposals for further encouraging applicant participation in consortia and/or changing consortium rules. One proposal is to change the calculation of a consortium’s discount rate from a simple average to a student-weighted average to better reflect the discounted funding attributed to each member. For libraries, which do not have students, one proposal is to attribute one student to each 50 square feet of library space.

The FNPRM also discusses various approaches to addressing the thorny issue of assuring that each member receives its proportional discount-weighted share of the consortium’s total discount (as opposed to just receiving its consortium average share). The underlying problem is that the consortium discount mechanism is based on an average, however determined, that may not match the average prices paid by the various members for different levels of service. As a result, the total discount will not accurately match nominal discounts that the members would receive on their share of the prices they pay. It could be more or less. Our view, originally discussed in the Consortium Discount Allocation section of our newsletter of October 27, 2008, is that the equitable way to distribute discount reimbursements is to use a proportional factor. We have yet to see a consortium audit that examines the ultimate distribution of discounts to consortium members.

Other aspects considered in this section of the FNPRM request comments on proposals to increase the discounts on consortium applications by 5% and/or to permit private-sector members.

Library Support:

The FNPRM also requests comments on the adequacy of, and alternatives to, the per-square-foot Category 2 budget for libraries.

SLD Fall Applicant Training:

The SLD has scheduled eight one-day applicant training workshops this fall from late September through early November. As of last Friday, registrations are closed or are being accepted on a waiting list only basis for Washington DC, Philadelphia, Minneapolis, New Orleans, Los Angeles, St. Louis, and Orlando. Regular registrations are still being accepted only for Portland (10/28/2014).

FCC Appeal Decisions Watch:

The FCC issued the following three orders on appeals filed by eight applicants and one service provider, and on one applicant’s petition for reconsideration:

Atlantic City Schools, et al. (DA 14-1083):  The FCC granted requests from six applicants finding that USAC had rejected their requested discount rates without providing them sufficient opportunity to provide supporting evidence. The applications were all remanded back to USAC.

Chicago Public Schools (DA 14-1084):  The FCC denied a Chicago petition for reconsideration. In this case, USAC had denied funding on an internal connections contract based on a Form 470 that had not indicated that Chicago was seeking such services. Chicago’s argument, which the FCC rejected, was that the failure to indicate a need for internal connections was a ministerial and clerical error, and did not affect the competitive bidding process because the request for such services was clearly indicated in the referenced RFP.

Green Tree School, et al. (DA 14-1085):  The FCC denied three requests to fund internal connections for FY 2013 — a year in which no funding was available for Priority 2 at any discount level. The appellants were essentially arguing that this was unfair and was causing financial hardships because the decision to deny funding was made so late in the funding year and that the service providers had already provided services. The FCC’s decision in these cases was not surprising, but the appellants’ argument concerning the FCC’s delay in denying Priority 2 funding at all levels in FY 2013 does suggest that the FCC might do well to make a decision on such funding for FY 2014 as early as possible.

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