Applicants, service providers, and consultants who have been involved in E-rate for any period of time, have likely experienced the frustration of waiting for USAC decisions, with no indications of why one or more applications are on hold. The worst of such situations, often referred to as “black holes,” arise when USAC appears to be investigating possible competitive bidding or other E-rate violations. Getting any information from USAC in these situations is typically difficult, if not impossible. Sometimes it is possible to guess at a potential problem based on USAC inquiries; other times USAC is simply uncommunicative. Decisions may be withheld for years. In the meantime, applicants do not get funded and suppliers do not get paid, often for equipment and services that have already been provided. Appealing to USAC or the FCC for decisions that have not been made, while perhaps technically possible, has never worked.
Last month, two suppliers — Essential Network Technologies (MO) and MetComm.Net (NY) —took a different approach by filing a joint petition (and an addendum) with the D.C. Circuit Court of Appeals asking the Court to order the FCC and/or USAC to issue funding decisions on recent and longstanding applications. * By our count, shown in the table below, almost one hundred of the funding requests involving these suppliers that have been filed in the last five funding years are still pending.
In addition to pending applications, USAC has notified the suppliers that it is investigating funding as far back as FY 2011 that could lead to the reduction, denial, or recission of other funding. From what can be determined, in part through reviewing PIA inquiries, USAC appears to be concerned with competitive bidding issues including possible assistance in preparing Form 470s. Without decisions, of course, neither the suppliers nor their customers can formally appeal USAC’s apparent allegations.
In their petition, the suppliers ask the Court to intervene. Arguing that the FCC rules do not place a clear and reasonable time limit on USAC’s deliberations, the suppliers urge the Court to review how the FCC and USAC are applying the E-rate rules to their situations or, in the alternative, to issue a writ of mandamus ** directing the FCC to “promptly issue funds” and render a written decision within 90 days.
The FCC’s response appears a bit circular. The FCC argues that the Court has no jurisdiction to consider the suppliers’ petition for review, since there is no final decision for the Court to review, and that, in any case, it is appropriate for USAC to withhold funding while investigating potential rule violations. The suppliers, in turn, argue that the FCC’s position that there is no decision to review “ignore that the very lack of a decision despite years having gone by is precisely why Petitioners are seeking relief from this Court,” and that they have, at a minimum, asserted a “substantial challenge” to the process. They note that the FCC does “not devote a single word attempting to refute Petitioners’ showing that delayed adjudication ‘will cause irreparable injury,’ which is the key element supporting expedited consideration of this matter.”
While we cannot predict whether the Court will grant the FCC’s motion to dismiss the petition, our hope is that the Court will allow the case to proceed and that the FCC will ultimately be ordered, or at least motivated, to adopt fair and effective procedures for the timely resolution of otherwise unresolved investigations. For too long, black holes have been a black mark on the E‑rate program.
Sidenote. One interesting aspect of this case, as reflected in email correspondence attached to the suppliers’ Court filings, are USAC’s questions and MetComm’s responses regarding the ongoing investigations. Most importantly, USAC is focusing on Form 470s submitted via MetComm’s own IP addresses. Such IP-identified Form 470s have long been considered by USAC as demonstrating a supplier’s potentially improper involvement in the competitive bidding process. Helping to file an applicant’s Form 470 means that the supplier had advanced knowledge of the applicant’s request for bids and may have even helped define the services requested. In response to these Form 470 filing questions, MetComm:
- Admitted to one specific instance when its staff submitted an existing customer’s Form 470 when that customer’s E-rate contact was physically unable to certify the form on time.
- Said it routinely sent correspondence to school leaders, existing clients or not, providing a list of suggested resources (including links to USAC information) for filing a Form 470. For existing customers, needing to rebid, MetComm offered to “provide you with a list of services you are currently receiving, in a format easy to follow when filing your Form 470. We may also provide recommendations for upgrades/downgrades.” Although USAC has never provided any guidance as to what pre-procurement information can be provided by an incumbent supplier, we can understand why such an offer might raise a USAC eyebrow or two.
- Most interestingly, with respect to the same IP issue, MetComm noted that, as an internet service provider, it has historically operated proxy servers within its network to provide caching and/or content filtering services for its customers. By doing so, internet traffic originated by MetComm’s customers, including the filing of Form 470s, would appear to come from a limited set of MetComm’s own IP addresses. ***
We take no position on any actions taken or not taken by Essential Network Technologies and MetComm.Net as E-rate providers, nor do we question the important role assigned to USAC to investigate any potential violations of E-rate rules. We are concerned, however, when such investigations become interminable. We urge USAC, the FCC, and now the Courts, to establish procedures and timetables to eliminate E-rate black holes.