News of the Week

Funding Status

Wave 32 for FY 2014 will be released on Wednesday, December 17th. 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 $2.10 billion.

Wave 77 for FY 2013 will be released Thursday, December 18th. 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 – The New E-Rate 2.1 Order

At an open Commission meeting last Thursday, the FCC adopted a second E-rate modernization Order that we’ve dubbed "E-Rate 2.1." The Order itself has not yet been publicly released, although a broad summary was provided in an FCC News Release and in last Friday’s S&L News Brief referenced below. As with the initial E-rate modernization Order (FCC 14-99) released last July, the new Order was approved by a 3:2 vote along party lines by the Democratic Commissioners. The differences of opinion between the two groups of Commissioners, as reflected in their approving or dissenting statements referenced below, were striking.

In addition to the News Release summary, an oral review of the Order by FCC staffer Bryan Boyle is included in the recorded video of the Commission meeting (beginning about 6 minutes into the recording). An interesting sidelight of the meeting was the presence of banner-carrying net neutrality-supporting protestors (a little over 3 minutes later), leading to a remark by the Chairman that the audience had "just seen the First Amendment at work."

Our outline of the key points of the Order, based on the staff review, is as follows:

1. Added flexibility to support new broadband connections, particularly with regard to funding of upfront installation charges (with the aim of reducing ongoing recurring costs).

    

   1. As of FY 2015:
      1. Elimination of the current requirement to amortize installation payments of $500,000 or more over at least three years. This will allow immediate E-rate discounts on installation charges of any magnitude.
      2. Permission for applicants to pay their non-discounted share of installation costs on an installment basis (probably up to 5 years).
   2. As of FY 2016:
      1. Elimination of the current eligibility distinction between lit and dark fiber leases by making dark fiber special construction charges eligible. Special construction charges refer to the cost of installing fiber connections between an applicant’s property line and a carrier’s existing distribution plant.
      2. E-rate support for "self-constructed" (i.e., purchased) fiber systems, assuming that such systems are deemed cost-effective versus leased fiber services.
      3. Additional E-rate support of installation charges of up to 10% if matched by state funding.
      4. A requirement to be placed on carriers receiving high-cost Connect America funds in rural areas to provide service to schools and libraries in those areas at prices reasonably comparable to urban broadband prices.
2. Increased funding.
   1. Most importantly, an increase in the annual E-rate funding cap to $3.9 billion (roughly a $1.5 billion increase) as of FY 2015, with continued inflationary adjustments thereafter.
   2. An extension of the Category 2 budget funding (currently limited to FY 2015 and FY 2016) through FY 2019.
   3. An increase in the five-year Category 2 budget for large urban libraries (believed to be defined as those serving populations of 250,000 or more) from $2.30 to $5.00 per square foot.
3. A change in the urban/rural definition, as proposed in certain petitions for reconsideration, to make urban clusters with populations under 25,000 "rural." An estimated 92% of all urban clusters, previously considered "urban," meet the new rural definition.
4. Direction to USAC to establish a Performance Management System to assess program effectiveness.
5. Rejection of other proposals in petitions for reconsideration to:
   1. Revert the document retention requirement back to a five-year standard.
   2. Eliminate the immediate ineligibility of telephone components.
   3. Eliminate the phase-out of voice service eligibility.

Details of all these changes will become clearer upon the release of the E-Rate 2.1 Order itself, hopefully before yearend. Even then, additional clarification may be needed.

E-Rate Updates and Reminders

USAC E-Rate Webinars:

USAC has scheduled a series of six instructional webinars on E-rate topics over five weeks beginning December 9th. The schedule and registration links are shown below. All live webinars will be at 3:00 p.m. EST. A link is provided to the recording of the one webinar held last week.

Schools and Libraries News Brief Dated December 12 – Further Modernization Order

The S&L News Brief for December 12, 2014 provides an even briefer summary of the second E rate modernization Order than appears in the FCC’s own News Release referenced above.