• Waiting for the Next PY2 Funding Wave
• Comment Period Set for FCC's New E-rate Proposals
• Status of ALA/ACLU Challenges to CIPA
• Updated GAO Report on E-rate Funding
• FCC Inquiry on Carrier's Universal Service Fund Collections

The following is a summary of the E-rate News for the Week of May 7, 2001, prepared by E-Rate Central. Official SLD news appears in the "What's New!" section of the SLD's Web site . Additional and archived information appears elsewhere on this Web site.

Waiting for the Next PY2 Funding Wave

A second wave of funding commitments for out-of-the-window PY2 applications had been expected this week but was not released. The next wave is now expected next week.

Comment Period Set for FCC's New E-rate Proposals

The FCC's Notice of Proposed Rule Making ("NPRM"), proposing changes to the allocation of remaining funds for Priority Two (internal connections) services and to the deadline for the receipt of non-recurring services, was published in the Federal Register on May 8. This action established the deadline for comments and reply comments as May 23 and May 30, respectively. Based on early indications gleaned from E-rate list serves, there does not appear to tremendous support for the FCC's proposed option of funding internal connections services only in alternate years (as discussed in our last News of the Week). To read a copy of the NPRM, as well as instructions for submitting comments, click here.

Status of ALA/ACLU Challenges to CIPA

Initial government responses are expected later this month on the two legal challenges to the Children's Internet Protection Act ("CIPA") filed by the ALA and ACLU. Both cases have effectively been joined and are on a fast track for decision, if necessary to the Supreme Court. E-rate school applicants, hoping for relief from CIPA for PY4, should note that the challenges apply only to the CIPA library provisions. Even if the challenges prevail, the CIPA (and N-CIPA) school provisions will remain in effect.

Updated GAO Report on E-rate Funding

The GAO released an "Update on E-rate Funding" and a separate review of state-level funding by service categories for the first three program years. One of the key issues in the original report, released last December, was an apparently high level of committed funds for PY1 and PY2 that had not been disbursed. As we had noted at the time, this was not surprising because the GAO report had been based on August 2000 data, well prior to the PY2 BEAR deadline. The GAO update notes that non-disbursed funds for the first two program year have dropped from $1.3 billion to $774 million as of April 2001, almost half of which are from PY1 and have been used to reduce telecom carrier contributions to the Universal Service Fund. The read the report, click here:

• Update on Funding at State Level by Category of Service

FCC Inquiry on Carrier's Universal Service Fund Collections

The FCC has initiated an inquiry into the process by which Universal Service Fund contributions (for all categories of Universal Service, not just E-rate) are collected from the telecommunications carriers. Although changes to this process will not directly affect E-rate applicants, one aspect of the inquiry – the way in which contribution costs are passed on to customers – is instructive. The FCC notes that some carriers have apparently chosen to recover costs through line item charges on only certain classes of customers. For example, although the current contribution factor is 6.9%, one long distance carrier (MCI Worldcom) has "raised its residential line item to 12%." As the FCC wryly acknowledges, "This discrepancy between the contribution factor and the amount carriers charge consumers is inexplicable to the casual observer." Our recommendation is: Don't just be a "casual observer." Carefully review your telecom bills, particularly long distance charges, looking not only at the basic rates, but also at the surcharges. If a change of carrier is planned, the best time to do this is at the start of a new E-rate program year, July 1.