E-Rate consultants – and applicants using the services of an E-Rate consultant – should take note of a recent Order released by the FCC (DA 12-1189, released July 25, 2012). In that Order, the FCC rejected three appeals of USAC decisions to deny E-Rate funding because the E-rate consultant had a financial relationship with the selected service provider. In the first instance, the applicant had entered into a multi-year service agreement with a company owned by the E-Rate consultant. In the second and third instances, the applicants’ consultant was paid a sales commission by the selected service provider.

The FCC stated that “[a] consultant, acting on behalf of the applicant, exerts great influence on an applicant’s bidding process and thus, should not have a financial relationship with a service provider which it selects (or recommends) on behalf of the applicant.” In the cases before it, the FCC found that the relationships between the consultants and the service providers impaired the applicants’ ability to hold fair and open competitive bidding processes. Such relationships constituted prohibited conflicts of interest in the competitive bidding process, and thus USAC’s denial of E-Rate funds was proper.

For more information about any of this decision or other E-Rate topics, please contact the Troy Law Group (www.troylawgroup.com).

There’s been lots of E-Rate news in July. See below for my recap.

Draft Eligible Services List (ESL) for FY2013 Released. The FCC has released the draft ESL for FY2013. The current draft does not significantly change the eligibility of currently eligible services and products. The draft, however, does reorganize the ESL to make it easier for applicants to determine which services and products are eligible for E-Rate discounts. Specifically, the draft ESL divides Priority 1 services into three sections grouped primarily by functionality: (1) “communications connectivity,” which includes digital transmission services, fiber, and Internet access; (2) “voice services,” which includes telephone services and components, and interconnected VoIP; and (3) “other designated and related services,” which includes email, voicemail, and webhosting. Comments are due on August 6, 2012 and reply comments are due on August 21, 2012.

More Funds Identified for FY2012. USAC has identified an additional $650 million in unused funds from previous funding years. These funds are being carried forward to FY2012, bringing the total available funds to $1.050 billion. USAC believes that such funds will be sufficient to make commitments at the 90% discount level for 2012 Priority 2 requests.

Largest Funding Wave in E-Rate History. On July 10, USAC issued its first wave of funding commitments for FY2012 and it was the largest in the history of the E-Rate program. USAC committed $646 million in universal service support to over 16,000 applicants for Priority 1 services at all discount levels.

FY2013 Form 470 Now Available. The Forms 470 for FY2013 are now available for online filing. If you have already filed a Form 470 for FY2012 and noted (in Block 2, Item 13) that it is for 2013 contracted services, no problem. However, you cannot cite such a form for non-contracted services (i.e., services provided under a tariff or on a month-to-month basis). For tariff or month-to-month services, you must file a Form 470 that has FY2013 in Block 1, Item 2.

For more information about any of the topics discussed above, please contact the Troy Law Group (www.troylawgroup.com).

The last day to receive recurring services for Funding Year 2011 is June 30, 2012. The last day to invoice USAC for those services is October 29, 2012. For service providers, there are a number of things to keep in mind.

If the applicant pays in full for the services and seeks reimbursement of the discount amount by filing a Billed Entity Reimbursement (BEAR) Form (FCC Form 472), the service provider must: (1) bill the applicant for the full cost of the service and remind the applicant to pay its bill in full before submitting the BEAR Form; (2) remind the applicant to provide the service provider with enough time to review and approve the BEAR Form before the invoicing deadline; (3) respond promptly to requests from USAC for additional information; and (4) reimburse the applicant the discount amount within 20 business days of receipt from USAC.

If the applicant pays the non-discount portion of the cost of the service and the service provider files a Service Provider Invoice (SPI) Form (FCC Form 474), the service provider must: (1) send out all remaining bills for the non-discount portion before it files the SPI Form; (2) remind the applicant that it is expected to pay its bills within 90 days; and (3) respond promptly to requests from USAC for additional information.

If an applicant or service provider misses the deadline for submitting a BEAR or SPI Form, it must request an extension of the deadline before a new invoice can be submitted. USAC has identified the following reasons for seeking an extension:

• Authorized service provider changes
• Authorized service substitutions
• No timely USAC notice (e.g., the service provider’s FCC Form 486 Notification Letter is returned as undeliverable)
• USAC errors (for example, in data entry) that ultimately result in a late invoice
• Documentation requirements that necessitate third-party contact or certification
• Natural or man-made disasters that prevent timely filing of invoices
• “Good Samaritan” BEAR Forms
• Circumstances beyond the service provider’s control

USAC updates the FRN Extension Table after an invoice deadline extension request has been granted. The extended deadline will appear in the far right-hand column of the search results.

For more information about invoicing USAC or requesting an invoice extension, please contact the Troy Law Group (www.troylawgroup.com).

The deadline for compliance with the Children’s Internet Policy Act (CIPA) is rapidly approaching. By July 1, 2012, applicants who receive E-Rate funds for Internet Access, Internal Connections, and Basic Maintenance must update their existing CIPA policy to include a provision “…for the education of minors about appropriate online behavior, including interacting with other individuals on social networking websites and in chat rooms and cyberbullying awareness and response.” Delays in compliance may result in the loss of E-Rate funds, so the time to act is now.

The FCC has made clear that it is unlikely to tolerate any delays, having stated “[a]lthough we encourage schools to update their Internet safety policies as soon as practicable, making this requirement effective for the 2012 funding year, which begins July 1, 2012, will give schools adequate time to amend their Internet safety policies and to implement procedures to comply with the new requirements after completion of this rulemaking proceeding.”

In order to demonstrate compliance, E-Rate applicants must amend their existing CIPA policy to incorporate the new language. The FCC is not requiring an additional public hearing unless (1) local policy requires one to amend the existing CIPA policy, or (2) an applicant is unable to show that it held a public hearing when its original CIPA policy was adopted. Applicants are also reminded that they are required to maintain all documentation related to CIPA compliance for a minimum of 5 years from the last date of service associated with a particular funding request.

For more information about CIPA compliance, please contact us by clicking the “Visit Troy Law Group” link above.

The Wireline Competition Bureau of the FCC announced that the E-rate program funding cap for funding year 2012 is $2,338,786,577. The Commission’s rules mandate that the E-rate program’s annual cap be adjusted based on the gross domestic product chain-type price index (GPD-CPI) measure of inflation. The cap for funding year 2012 represents a 2.1% increase over the cap for funding year 2011 ($2,290,682,250). The FCC began indexing the annual funding cap to inflation in 2010 to allow the E-rate program to keep pace with the changing telecommunications needs of schools and libraries.