AT&T AND VERIZON WEIGH IN ON THE FCC’S E-RATE MODERNIZATION EFFORTS

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Sep 262013
 

The initial round of comments in the FCC’s E-Rate modernization proceeding have arrived – over 700 in all. Many comments are simple one- or two-pagers asking the FCC either to increase funding or preserve the eligibility of web-hosting and/or email. There are, however, almost 200 comments that take a deeper dive into the multitude of proposals and questions posed in the FCC’s NPRM. In this edition, we examine the comments of the nation’s two largest service providers: AT&T and Verizon.

1. Bringing Affordable Broadband to America’s Schools and Libraries.

Both AT&T and Verizon support the FCC’s efforts to bring high-speed broadband to the nation’s classrooms. AT&T recommends: (1) giving first priority to schools and libraries that have inadequate or no high-speed broadband; and (2) ensuring that applicants have adequate internal connections to effectively use broadband services.

Verizon, on the other hand, argues that the Commission needs to collect and analyze better data before implementing far-reaching changes to the E-Rate program. Verizon asks the FCC to set bandwidth goals for schools and targets for achieving those goals. Such targets would help determine where more help is needed and focus solutions accordingly. Verizon also believes that the FCC should collect bandwidth data from schools and use that data to identify areas where bandwidth goals are not being met. Only then will the Commission be able to understand the obstacles faced by particular schools and develop appropriate strategies for overcoming them.

The companies differ on whether to phase out support for traditional telephony services and basic Internet access. AT&T recommends that E-Rate funds only be used for the provision of high-speed broadband connectivity, with support for circuit-switched and TDM-based services eventually eliminated over time. Verizon instead would focus on distributing available funds more efficiently. Verizon would (1) place a per-student limit on E-Rate support; (2) revise the discount matrix to ensure that funding is targeted to the most economically-disadvantaged schools; (3) limit the use of Priority 2 funds to only the equipment necessary to transmit bandwidth within a building, and (4) phase out support for basic maintenance. Verizon prefers such tactics to eliminating support for some or all of voice services, or increasing the overall size of the E-Rate fund.

Both companies strongly believe that any proposals adopted by the Commission must be technology neutral. AT&T and Verizon oppose proposals to favor private fiber networks over other technology platforms, believing that individual schools and libraries must be able to choose the technology that best meets their high-capacity broadband needs. AT&T disagrees with the Commission’s proposal to use E-Rate money to build out private fiber networks to institutions that already have access to cost-effective broadband.

2. Maximizing the Cost Effectiveness of E-Rate Funds.

Both companies support the FCC’s efforts to increase the cost effectiveness of E-Rate funds.
AT&T supports the Commission’s proposal to encourage schools and libraries to purchase products under consortia or state contracts. Verizon, on the other hand, states that current rules already allow for consortia and bulk buying, and thus a preference for such purchasing is unnecessary. To the extent bulk buying is used, however, AT&T rejects the suggestion that prices available through bulk-buying programs should constitute the ceiling for which E-Rate support will be available.

Both companies oppose the FCC’s proposal to make bid responses and pricing information public. They argue that such a move is unnecessary and ill-advised because: (1) most pricing data is already publicly available; (2) the data is not particularly useful given the unique requirements of each service arrangement; (3) competitive bidding requirements and the Lowest Corresponding Price rule already ensure that applicants receive the lowest price charged for similarly-situated customers; and (4) the Commission should not assume responsibility for setting prices and/or price controls.

3. Streamlining Administration of the E-Rate Fund.

AT&T and Verizon support the Commission’s attempts to simplify administration of the E-Rate program. Both companies encourage the FCC to allow applicants to receive BEAR disbursements directly from USAC. AT&T would go further, however, and reform the entire funding disbursement process. AT&T identifies a number of inefficiencies and problems with the SPI invoicing method and suggests that E-Rate funds be provided directly to schools to pay for approved E-Rate products and services.

Both companies also question whether additional audit requirements are necessary. If such audits must be performed, AT&T states that applicants and service providers below a certain threshold should not be exempt.

Finally, Verizon suggests the following to further streamline the process: (1) allow parties to multi-year contracts to only go through the approval process once; (2) clarify the gift rules to allow (a) short-term market or technology trials with free or discounted pricing and (b) charitable donations as long as they are not contingent upon the purchase of E-Rate products or services. Verizon opposes (1) requiring service providers to certify compliance with state and local procurement laws; (2) increasing the complexity and burdens of the competitive bidding process; and (3) adding additional program compliance requirements such as officer signatures and longer document retention requirements.

For more information on AT&T’s and Verizon’s comments, or other comments filed in the FCC’s E-Rate modernization proceeding, please contact us by clicking on the “Visit Troy Law Group” link above.

FCC INITIATES RULEMAKING TO MODERNIZE E-RATE

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Jul 292013
 

It’s been a busy couple of weeks in the world of E-Rate. On July 19, the FCC unanimously approved a Notice of Proposed Rulemaking (NPRM) designed to overhaul the E-Rate program. The move marks the first comprehensive update of the E-Rate program since its inception in 1997. Citing inadequate connection speeds – half of E-Rate applicants claim to have slower connection speeds than the average American home – the Commission stated that there is broad consensus that the E-Rate program needs to be updated and revitalized.

The Commission set forth three goals – increased broadband capacity, cost effective purchasing, and streamlined program administration – aimed at modernizing the E-Rate program and providing American schools affordable access to high-capacity broadband.

1. Increased Broadband Capacity: To ensure schools and libraries have affordable access to 21st century broadband, the NPRM seeks comment on a range of approaches to focus funds on high-capacity broadband, including:

• Simplifying rules on fiber deployment to lower barriers to new construction
• Prioritizing funding for new fiber deployments that will drive higher speeds and long-term efficiency
• Phasing out support for services like paging and directory assistance
• Ensuring that schools and libraries can access funding for modern high-speed Wi-Fi networks in classrooms and library buildings
• Allocating funding on a simplified, per-student basis

2. Cost-Effective Purchasing: To maximize the cost-effectiveness of E-rate purchases, the NPRM seeks comment on:

• Increasing consortium purchasing to drive down prices
• Creating other bulk buying opportunities and increasing pricing transparency
• Increasing transparency on how E-rate dollars are spent
• Improving the competitive bidding process
• Creating a pilot program to incentivize and test more cost-effective purchasing practices

3. Streamlined Program Administration: To streamline the administration of the E-rate program, the NPRM seeks comment on:

• Speeding review of E-rate applications
• Providing a streamlined electronic filing system and requiring electronic filing of all documents
• Increasing the transparency of USAC’s processes
• Simplifying the eligible services list and adopting more efficient ways to disburse E-rate funds
• Streamlining the E-rate appeals process

The NPRM also seeks comment on a variety of other issues, including:

• The applicability of the Children’s Internet Protection Act (CIPA) to devices brought into schools and libraries, and to devices provided by schools and libraries for at-home use
• Adjusting to changes to the National School Lunch Program that affect E-rate
• Additional measures for protecting the program from waste, fraud and abuse
• Wireless community hotspots

The full text of the NPRM was released last week and can be accessed at http://www.fcc.gov/document/fcc-launches-update-e-rate-broadband-schools-libraries. Comments are due on September 16, 2013 and reply comments are due on October 16, 2013. If you are interested in commenting on the NPRM or would like additional information, please contact us by clicking the “Visit Troy Law Group” link above.

FCC PROPOSES TO END BUNDLED SERVICES EXCEPTION TO E-RATE COST ALLOCATION RULES

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May 012013
 

The FCC recently proposed eliminating the “bundled services” exception to the E-Rate cost allocation rules. (See Public Notice, DA-13-592, rel. April 9, 2013.) Under this exception, service providers were allowed to offer free or discounted equipment – most typically free cell phones – to customers who signed a service contract. As long as the offer was made available to the public or a certain class of users, service providers were able to bundle ineligible end-user equipment with eligible services without needing to cost allocate the ineligible portion. The FCC proposes to change all that.

Under the new proposal, service providers must conduct a cost allocation in all instances in which ineligible equipment is bundled with eligible services. No longer will service providers be able to rely upon their free cell phone plans (or other bundled service arrangements) as justification for providing schools and libraries with free (or discounted) equipment. Beginning in Funding Year 2014, all ineligible components must be cost allocated “even if bundled with E-Rate eligible services and offered to the public or some class of users.”

Comments are due on May 23, 2013 and reply comments are due on June 7, 2013.

If you are interested in commenting, or would like to receive more information about the FCC’s proposed elimination of the “bundled services” exception to the E-Rate cost allocation rules, please contact the Troy Law Group (www.troylawgroup.com).

COMMISSIONER ROSENWORCEL CALLS FOR E-RATE 2.0

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Apr 172013
 

At a recent education technology policy summit, Commissioner Jessica Rosenworcel made a compelling case for a major overhaul of the E-Rate program. The E-Rate of the future – E-Rate 2.0 – would “reboot, reinvigorate, and recharge” the E-Rate program as we know it.

As Commissioner Rosenworcel explains, the current system is not keeping pace with reality. Year after year, the demand for E-Rate support is double the annual $2.3 billion currently available. More than 80% of schools and libraries do not feel that their existing broadband connections meet their needs. As a result, school administrators face tough choices about how to divvy up that connectivity and determine which grades (sometimes, which classrooms) will get it and which programs can reasonably be run at the speeds available. Increased adoption of the Common Core education standards – a key part of which involves an online assessment of students – only serves to increase the need for more bandwidth. Regrettably, however, roughly half of E-Rate schools only have Internet connectivity at speeds of 3 Megabits or less. Access to adequate broadband capacity is “not a luxury,” according to Rosenworcel, but rather “a necessity for our next generation to be able to compete.”

Commissioner Rosenworcel proposes a multi-pronged approach to revamping the current E-Rate program and realizing the benefits of E-Rate 2.0. Among the suggested changes are:

• Increase E-Rate funding levels by redirecting money saved from audits of the Lifeline (low-income) universal service program to E-Rate 2.0. Audits of the Lifeline program have already saved more than $200 million in 2012 and are on track to save as much as $400 million in 2013.

• Set clear capacity goals for schools seeking E-Rate funding. Currently, only 15% of schools believe they have the capacity they need. Commissioner Rosenworcel proposes that, by the 2015 school year, every school should have access to 100 Megabits per 1,000 students; and, by the end of the decade, every school should have access to 1 Gigabit per 1,000 students. Going forward, every E-Rate applicant should also be required to collect information from applicants about their existing capacity and projected needs.

• Establish more public-private partnerships to create “cost effective technologies, educational applications, and devices” for classrooms across the country.

• Simplify the process for E-Rate applicants by allowing multi-year applications and greater use of consortia applications. These changes would reduce paperwork and administrative expense, while allowing for greater scale and more cost-effective purchasing.

• Increase the availability of broadband connectivity outside the classroom. Commissioner Rosenworcel notes that many students have no broadband access outside of school hours, making it difficult for them to complete basic school assignments. The Commissioner calls for a study of the FCC E-Rate School Spots program – which allows schools to stay open after classroom hours for community broadband needs – to see how it might help close the digital learning gap.

Any such changes would need the approval of the full Commission before taking effect. We are likely to see whether any of them have traction in the coming year.

RECENT FCC DECISIONS

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Dec 052012
 

The FCC released a number of decisions on E-Rate appeals yesterday. We’ve got an interesting case involving Net56, good news for Fort Worth Independent School District, and not so good news for Sprint. The highlights of each are included below.

1. Net56, Inc. (DA 12-1951). In a decision that largely mirrors a previous Net56 ruling (see DA 12-1792), the FCC found it acceptable for an applicant to make payments directly to a financial services company for eligible and ineligible services, and then for the financial services company to pay Net56 for the eligible services. The FCC also concluded that Net56’s centralized solution, whereby most of the equipment was housed off-site at Net56’s location, was cost effective. In so finding, the FCC noted that USAC failed to account for all of the relevant costs (e.g., licenses, additional bandwidth, and training) when comparing Net56’s leased solution to a premises-based solution. Finally – and though the issue was never raised by USAC – the FCC found that Net56 complied with the Lowest Corresponding Price (LCP) rule. To make this showing, Net56 had provided examples of prices for its commercial customers and compared them to the prices charged the applicant.

2. Fort Worth Independent School District (DA 12-1937). Here, the FCC relied upon documentation provided on appeal to find that Fort Worth had received the recurring services and switches for which it billed USAC. The fact that Fort Worth later replaced the switches it had purchased with ones that had greater capacity was deemed acceptable because, at the time of the replacement, the Commission’s rules permitted applicants to upgrade their equipment on a yearly basis.

3. Sprint-Florida, Inc. (DA 12-1938). In this decision dating back to Funding Year 1999, the FCC ordered Sprint to reimburse USAC for funds disbursed in violation of Commission rules. The genesis of the dispute was a 2002 audit by USAC that alleged Sprint had failed to deliver or install many of the funded PBX components. Sprint subsequently conducted an internal audit and, despite identifying various billing errors on its own, disputed USAC’s findings on multiple grounds. In the end, the FCC rejected Sprint’s arguments, finding that USAC appropriately relied upon the applicant’s physical inventory documentation (along with its own site visits) to determine which equipment was in fact installed. The FCC found Sprint’s records to be “less than reliable” given Sprint’s previous dependence upon installation documentation that was admittedly incorrect.

For more information about these decisions – or any of the issues raised therein – please contact the Troy Law Group (www.troylawgroup.com).

FY2013 FILING WINDOW ANNOUNCED

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Nov 152012
 

The filing window for FY2013 Forms 471 will open at noon (EST) on Wednesday, December 12, 2012 and close at 11:59pm (EST) on Thursday, March 14, 2013. The window will be open for 93 days.

For the Form 471 to be considered “in window,” both the Form 471 and the Item 21 attachment must be submitted online, received by USAC, or postmarked no later than the filing window closing date.

Given the March 14 deadline for filing the Form 471, all Forms 470 must be posted by February 14, 2013 to comply with the 28-day competitive bidding requirement. Applicants filing their Form 470 online can do so until the February 14 deadline. (Forms 470 that are submitted online are posted immediately and the 28-day clock begins.) However, applicants submitting their Form 470 on paper should ensure that USAC receives their filing by February 7. USAC has indicated that it will make every effort to post Forms 470 by February 14 if they are received by February 7.

DEADLINES EXTENDED DUE TO HURRICANE SANDY

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Nov 082012
 

Due to the disastrous effects of Hurricane Sandy, USAC has extended the deadlines for Form 486 filings, as well as Funding Year 2011 recurring services invoice submissions. The new deadline for both is January 28, 2013. This extension applies to all participants in the E-Rate program; there is no need to submit individual requests.

Applicants and service providers should note that, with this extension, the invoices for FY 2011 recurring and non-recurring services are now due on the same day: January 28, 2013.

Additionally, USAC has indicated that additional time will be given to respond to Program Integrity Assurance (PIA) requests. Applicants are encouraged to contact their PIA reviewer if any inquiries are outstanding.

NON-RECURRING SERVICE DELIVERY DEADLINE IS APPROACHING

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Sep 272012
 

The deadline for the delivery and installation of non-recurring services (i.e., internal connections) for Fiscal Year 2011 is rapidly approaching. All non-recurring services must be received by September 30, 2012, if no extension has been granted.

If you must request an extension for the delivery and installation of non-recurring services, the deadline for doing so is also September 30, 2012. The applicant or service provider must file a “service delivery deadline extension request” to extend the service delivery deadline. A one-year extension of the deadline can be requested if: (1) the service provider was unable to complete delivery and installation of the services for reasons beyond the service provider’s control; or (2) the applicant certifies that the service provider was unwilling to complete delivery after USAC withheld payment for the services on a properly submitted invoice for more than 60 days.

When requesting a service delivery deadline extension, it is also important to check the term of the applicable contract. If the contract expires before the date when services will be delivered, the applicant and service provider must extend the term of the existing contract (assuming such an extension is allowed by the terms of the contract and any applicable state and local rules). An FCC Form 500 must then be filed to notify USAC of the extended contract expiration date.

In addition, be sure to check your FRNs – if an extension was granted for the delivery and installation of non-recurring services in previous funding years, the deadline for receipt of those services may also be September 30, 2012.

Finally, if September 30, 2012 is the last day to receive non-recurring services, then January 28, 2013 is the last day to invoice USAC for those services.

For more information about the deadline for the receipt of non-recurring services – as well as any related extensions – please contact the Troy Law Group (www.troylawgroup.com).

RECENT E-RATE APPEALS

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Sep 192012
 

Applicants and service providers alike should take note of the following FCC decisions on E-Rate appeals. A must-read!

1. Assumption-All Saints School, et al. (DA 12-1323). Found that, by listing an email address affiliated with the applicants’ service provider (Future Generation) as the preferred method of contact on their Forms 470, applicants violated the Commission’s competitive bidding requirements. Future Generation was the current service provider for each applicant and the ultimate winner in the competitive bidding process. The Commission held that, consistent with past decisions, listing a service provider as the contact person on a Form 470 and allowing that service provider to participate in the competitive bidding process taints the competitive bidding process.

2. Ed Tech Solutions LLC (DA 12-1328). Concluded that Ed Tech’s contracts properly allowed payments to be made in installments after the work was completed. In doing so, the FCC found persuasive that the contracts at issue were entered into before the Commission set time limits on deferred payments for the non-discounted portion of payments for services. Also weighing in Ed Tech’s favor was the fact that all the contracts provided a specific time table for payment (25% upon project completion and 25% every three months until the balance was paid). The FCC went on to find (contrary to USAC’s assertions) that, in and of themselves, the Form 473 certifications do not require service providers to seek payment from USAC at the approximate time it receives reimbursement from the E-Rate applicant. In addition (and also contrary to USAC’s claims), the deferred payment plans at issue did not violate the necessary resources requirement, as the applicants had a reasonable expectation of being able to pay Ed Tech for the non-discounted portion when those funds became due under the contract. Finally, the FCC concluded that neither its rules nor USAC’s procedures required an applicant to pay the service provider the discounted portion during the funding year.

3. Truth or Consequences Municipal Schools et al. (DA 12-1361). Held that applicant violated the competitive bidding requirements by failing to evaluate all bids received. The FCC found decisive that the bid evaluation worksheets were dated more than a month after the relevant contract had been signed.

4. Iowa Department of Education et al. (DA 12-788). Found that, despite an earlier FCC decision approving E-Rate discounts on Iowa Communications Network’s (ICN’s) services on a “prospective basis,” applicants were entitled to discounts in previous funding years. In December 2000, the FCC had determined, on remand from the DC Circuit, that ICN was a “telecommunications carrier” eligible to receive E-Rate discounts on a “prospective basis” (i.e., Funding Years 2001 and later). At issue were pending applications for services provided by ICN in Funding Years 1998, 1999, and 2000. The FCC concluded that the “prospective” language was not intended to preclude retroactive application of the decision, reasoning that (a) the Commission had not considered the fact that applications were pending for prior funding years when it issued its 2000 decision, and, importantly, (b) ICN was a “telecommunications carrier” when the applicants at issue requested E-Rate support.

For more information about these decisions or other E-Rate topics, please contact the Troy Law Group (www.troylawgroup.com).

USAC MAY BE CALLING

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Sep 112012
 

Attention everyone – USAC’s summer deferral period for application review and problem resolution ended last Friday (September 7). If USAC stopped processing or reviewing your funding request because it was unable to reach you during the summer, be prepared to answer USAC’s questions when they resume attempts to contact you. (This year, USAC’s summer deferral period ran from May 25 to September 7, 2012.)

USAC generally requests additional information in the following two situations: (1) USAC needs to resolve a problem, such as missing or inconsistent information in a program form; or (2) USAC needs more information to review an application and initiates a Program Integrity Assurance (PIA) review.

USAC initially utilizes an applicant’s or service provider’s preferred mode of contact to ask questions or request additional information. If USAC does not hear back within 7 days, it will attempt to make contact again, and also will inform the state E-Rate coordinator that it is trying to contact you. If USAC still has not heard from you within 15 days after the first attempt to contact you, it will use the information available to complete the processing of your application – in other words, incomplete paper forms may be returned or funding requests may be reduced or denied.

Remember, though, if USAC’s first attempt to contact you was after May 25, 2012 (the beginning of the summer deferral period) and it could not confirm that you were available to respond to questions, USAC will resume its efforts to contact you starting September 10. However, if USAC made contact with you before May 25, the 15-day response clock started and USAC may have acted on the information available if you did not respond within 15 days. (If your application is still under review, you always can ask for more time to respond if you are unable to meet the 15-day response deadline.)

For more information about communications with USAC or other E-Rate topics, please contact the Troy Law Group (www.troylawgroup.com).