News of the Week

Funding Status

Wave 29 for FY 2014 will be released on Wednesday, November 26th. 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 $2.08 billion.

Wave 75 for FY 2013 will be released the following Monday, December 1st. 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 – New Funding Under E-Rate 2.1?

FCC Chairman Wheeler announced last week that he will be circulating a draft of a new E-rate order to further modernize the E-rate program for review by the other Commissioners. The proposed order has been placed on the Commission’s agenda for the upcoming December 11th meeting. Like the first E-rate modernization Order issued last July, the second order will also be focused on broadband issues. Among other changes, the first Order provided targeted funding for broadband connectivity within buildings (i.e. for Category 2). The second order is expected to target funding for broadband connectivity to buildings (i.e. for Category 1).

With one major exception, the Chairman’s announcement did little more than hint at Category 1 rule changes being considered. The big news, however, was the proposal to increase annual E-rate funding by almost $1.5 billion, from roughly $2.4 billion, to $3.9 billion. A Fact Sheet on the Chairman’s plan, together with an E-Rate Data Update, stress the need and statistical justification for the additional funding to provide fiber optic services for all schools and libraries sufficient to meet the five-year broadband connectivity goals of the first E-rate modernization Order and of the President’s ConnectEd initiative.

Additional E-rate funding, which will require an increase — deemed by the Chairman as only “16 cents a month” for individual ratepayers — in Universal Service Fund surcharges, is not without controversy. It was immediately endorsed by a coalition of sixteen school and library organizations, but just as immediately decried by two of the FCC’s own Commissioners, Ajit Pai and Mike O'Rielly. If the increase is approved, as we expect it will be, it should become effective for FY 2015, providing additional funding for both Category 1 and Category 2.

Reading between the lines of the Chairman’s announcement and supporting documents, the second E-rate modernization order — which we have dubbed “E-Rate 2.1” — appears to focus on Category 1 rule changes that may include such items as:

• Support the purchase of applicant-owned fiber.
• Remove upfront amortization requirements on high-cost fiber installation projects, in part to help reduce ongoing monthly recurring costs.
• Eliminate the eligibility restrictions on special construction costs for dark fiber systems.
• Support public/private fiber network projects.

We expect that details of the draft E-Rate 2.1 order, which were not made public, will become clearer over the next few weeks. Hopefully, we will see the release of the final order shortly after the December FCC meeting. Only then will we be able to more precisely analyze its impact on FY 2015 and/or FY 2016.

E-Rate Updates and Reminders

FCC Appeal Decision Watch:

The FCC’s Wireline Competition Bureau (“WCB”) reminded E-rate and other Universal Service Fund (“USF”) participants last week (DA 14-1657) that requests for review (i.e., appeals) of USAC decisions must first go to USAC. Should it be needed, requests for review of USAC appeal decisions can subsequently be made to the FCC.

This new rule became effective September 18, 2014. The WCB indicated that any such appeals received first by the FCC — but only through the remainder of 2014 — will be considered requests to USAC and will be transmitted to USAC for processing. Effective January 1, 2015, however, requests for review submitted first to the FCC will be dismissed (see footnote #4). It is not clear whether an FCC dismissal at this point would restart the 60-day appeal window deadline. If not, it may be too late for appellants to refile their appeals within the 60-day deadline to USAC.

Requests for waivers of FCC rules — e.g., for a missed E-rate filing deadline (including an appeal deadline) — should be made directly to the FCC. USAC has no authority to waive rules.

Form 471 Item 8f Considerations:

One possible implication of the forthcoming E-Rate 2.1 order and new funding discussed above is that it will focus more public attention on the ability of schools and libraries to meet the FCC’s and the President’s Gigabit connectivity goals. Indeed, Internet speed may be on its way to becoming an important measurable metric of educational achievement in the United States.

If this comes to pass, an E-rate applicant may be held accountable for missing its connectivity goal. The data publicly available in the Block 4, Item 8, of the revised Form 471 will make it difficult to hide. For those well under the connectivity goal, the last part of this section, Item 8f (as shown below), becomes the excuse. An E-rate applicant contact facing this situation may want to confirm with their principal, superintendent, chief librarian, and/or board that everyone agrees on the reason(s) for any connectivity shortfall.

8f. For those schools and libraries that do not have sufficient LAN/WLAN capacity and coverage to support the educational objectives or library activities conducted at that location, is the reason (check all that apply):

1. Equipment too costly
2. Installation too costly
3. Broadband connection speed to building is too slow
4. Inadequate local area network (LAN) services/internal networks and wiring
5. Outdated equipment
6. Lack of training and technical support
7. Inconsistent service/frequent outages and down time
8. Physical structure or layout of building(s)
9. Other: If so, please provide it here:

Special Edition S&L News Brief Dated November 20 – New Form 470 (and 471) Approved

A Special Edition of the S&L News Brief for November 20, 2014 announced the availability of the revised Form 470 and discussed the transitional procedures affecting the switch from the old to the new version. The changeover affects only those applicants who had partially completed the earlier version of the Form 470 online (or had mailed in a paper copy of the Form 470 that had not yet been data entered by USAC) as of 7:00 p.m. EST on November 20, 2014. The change does not affect applicants whose earlier Form 470s for FY 2015 had been completed and certified, nor does it affect applicants who have yet to file Form 470s for the coming year.

The best way to check if a Form 470 has been fully submitted and certified is to check for the Form 470 using the Search Posted button on the SLD website. A completed Form 470 will show both a “Posting Date” and a “Certification Received Date.”  The only trick in using this tool is that Form 470s submitted before the November 20th cutover date will be found under Funding Year 2014, not 2015.

Any applicant caught with a partially completed Form 470 needs to read the Special Edition News Brief carefully. Basically:  (a) if the earlier Form 470 was started — but not submitted — by the cutover, it will have to be started anew; or (b) if it was submitted — but not certified — by the cutover, a new certification must be submitted on paper made using the certification pages for the revised Form 470.

One important point not noted in the Special Edition News Brief was that a revised version of the Form 471 — which must be filed electronically online — was also approved at the same time. An actual version of the revised Form 471 will become available online only when the application window opens for FY 2015 (expected in early January). However, instructions for the revised Form 471, and a paper copy showing the fields that will be required, have been made available. We strongly encourage applicants to review the revised Form 471 as soon as possible to understand what information will be required.  We discussed Item 8f of the Block 4 above. But it is even more important to understand the level of detail that will be required in the Item 21 fields in Block 5. This is not information that an applicant is going to be happy seeing for the first time in the last few days of the application window.

Schools and Libraries News Brief Dated November 21 – Applicant and Vendor Eligibility

The S&L News Brief for November 21, 2014 provides the beginning of a planned series of informational articles about each step in the E-rate application process. The first of these articles briefly reviews the criteria under which schools and libraries are eligible to receive discounts under the E-rate program. It also discusses the E-rate program requirements for service providers.