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November 10, 2014


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.

Funding Status

Wave 27 for FY 2014 will be released on Thursday, November 13th. Funding for FY 2014 is available for Priority 1 services only. Priority 2 funding is being denied at all discount levels. Cumulative funding for FY 2014 is $2.07 billion.

Wave 73 for FY 2013 will be released on Friday, November 14th. 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 $2.13 billion.

E-Rate Modernization – Category Two Budget Strategies, Part 1

The good news, after two years of no funding for Priority 2 requests at any discount level, is that USAC is poised to fund an estimated $1 billion in Category 2 requests in FY 2015, at least for the higher discount applicants. The bad news is that funding for any particular school or library will be limited to a five-year budget cap, and that the application process itself may be complex. Category 2 applications are likely to entail a steep learning curve for applicants and their suppliers — and USAC itself.

At this stage in the E-rate modernization process there are several critical unknowns. Most importantly:

  1. Under current FCC rules, the Category 2 budget cap funding mechanism applies only to FY 2015 and FY 2016. Prior to FY 2017, the FCC must act to extend and/or modify the funding process or the program will revert to the pre-FY 2015 uncapped funding model (including reinstatement of the 2-in-5 rule). Entities fully or partially funded in FY 2015 and/or FY 2016, however, will remain subject to the five-year budget limitation.
  2. The basic data fields needed to complete a Form 471 for Category 2 are known, but we have not yet seen how the Form 471 will be implemented online. More specifically, we don’t know how the system — or PIA review — will deal with a funding request in excess of the budget cap, be it in a single FRN (see the forthcoming Part 2 of this series), in multiple FRNs within a single application, or in multiple applications.
  3. USAC will undoubtedly have to develop new procedures to deal with post-commitment change requests such as service substitutions, entity budget reallocations, and unused commitments.

This is the first in a planned four-part series of articles on Category 2 budget strategies. Given what is known and unknown about the Category 2 funding rules and procedures, our objective is to explore how a Category 2 application (or applications) could or should be structured for maximum funding and flexibility. Future articles are planned to address the following funding situations:

Part 2 will focus on a one-time, single-school (or library) application to fund an infrastructure build-out estimated to exceed the five-year Category 2 budget cap. Our tentative conclusion is that attention must be paid to the quantity of each component in the project estimate, and to the line-by-line order in which these components are listed in the application.
Part 3 will expand the single-entity funding request model to consider a multiple-entity application for a school district, library system, or consortium. Our tentative conclusion is that maximum flexibility can be achieved through the use of multiple FRNs, in many cases one FRN per entity.
Part 4 will address the uncertainty of multi-year funding commitments for staged construction projects, managed internal broadband services, and maintenance. Our tentative conclusion is that such a multi-year filing strategy may be suboptimal unless FCC rules are adopted to prioritize funding in years 2-5 for applicants subject to the five-year budget limitation.

E-Rate Updates and Reminders

FCC Appeal Decision Watch:

The FCC granted two and denied three requests for review and/or waiver (DA 14-607) regarding extensions of service implementation deadlines. Normally, the deadline for a non-recurring service (e.g., equipment installation) is September 30th, three months after the end of the funding year. For a funding commitment, service substitution, or SPIN change received on or after March 1st of a funding year, this deadline is automatically extended a full additional year. Upon request, which must be received by the original implementation deadline, USAC will grant a year’s extension to the implementation deadline based on delays beyond the service provider’s control (or in certain circumstances when USAC payments are delayed).

In the five cases addressed in these appeals, the applicants were seeking implementation extensions, but had missed the deadline for making those requests. The difference between the appeals that were granted and those that were denied hinged on when and what actions the applicants took after missing their extension request deadlines. In both approved appeal situations, the applicants had filed Form 500s to extend their contracts, initially failing to recognize that they also needed to file service delivery extension requests — an additional step they undertook promptly when advised.  The denied appeal situations involved belated requests for extensions, in two cases unsuccessfully explained by staff turnover.

Schools and Libraries News Brief Dated November 7 – Business Class Internet Service

The S&L News Brief for November 7, 2014 discusses a special provision included in the E-rate modernization Order to exempt certain and narrowly-defined Internet services from competitive bidding rules. Specifically, a Form 470 posting for Internet access services is not required if the service meets all of the following conditions:

  1. The service is “commercially available.”  This means that it is publicly available to non-residential customers (such as enterprise, small business, or other government customers) in the same form and at the same rates that it is offered to schools or libraries. Therefore, it may not be purchased through a master contract signed for just certain customers, even if the contract includes schools and libraries.
  2. The service is low cost. This means that the total annual pre-discount cost for the service, including any one time costs such as installation, does not exceed $3,600 per year per individual school or library.
  3. The service is high speed. This means that the service must provide bandwidth speeds of at least 100 Mbps downstream and 10 Mbps upstream.
  4. The service provides access to the Internet, not just broadband transmission, at those minimum speeds. This means that the service type on your application must be Internet Access and you receive basic conduit access to the Internet at the required minimum speeds.

Adherence to these conditions is critical so extreme caution must be exercised if funding requests are to be submitted without first filing a Form 470. Applicants planning to take advantage of this exemption should carefully review the FAQ included in this News Brief.

Not filing a Form 470, then discovering only later during PIA review that the exemption conditions were not met, would lead to a denial. A safer approach is to avoid the exemption entirely and follow the normal Form 470 process for all Internet services.