• Executive Change at the SLD
• Funding Status: PY3 – PY4
• Minor Change in PY4 CIPA Requirements for Libraries
• Defining and Discounting Non-Recurring Services
• COMAD Letters

Executive Change at the SLD

Kate Moore, President of the SLD, is resigning effective June 11 to enter the teaching profession. Kate has been an effective and responsive leader of the SLD for three and a half years. We will miss her. If she can in anyway match the educational impact she has had with E-rate in her new role, she will be a tremendous teacher (see Kate's letter).

George McDonald, currently the SLD's Director of Operations, will assume the role of Acting President upon Kate's departure. George has been with the E-rate program since December 1997 and has lately been taking a more active public role. We expect a smooth transition.

Funding Status: PY3 – PY4

PY4

The FCC has confirmed the $2.25 billion E-rate funding level for PY4. This action resolves the first of three issues that have been delaying PY4 funding awards. The outstanding issues remain: (a) approval of a revised Form 486 and a new Form 479; and (b) a FCC ruling on funding priorities for internal connection discounts.

Approval of the forms, together with SLD system changes required to process them, is not expected until later in June. This suggests that the first waves of Funding Commitment Decision Letters ("FCDLs") will not begin until July. Most likely, initial funding waves will deal with applications involving only Priority One telecommunications and Internet access services.

The timing of the FCC ruling on internal connection priorities is more problematic. The reply comment deadline on the FCC's proposed options expired May 30. Approximately 55 direct comments were received, most arguing against the FCC's proposal to fund internal connections in alternate years. At best, we expect FCDLs later this summer for applications including any internal connection requests.

PY3

The first wave of FCDLs dealing with successful PY3 appeals was mailed a week ago. The wave included approximately 650 letters representing over $22 million in additional funding. The SLD is still working on about 100 PY3 appeals, many involving Form 471 Item 22 and Item 25 issues.

Minor Change in PY4 CIPA Requirements for Libraries

Legal challenges by the American Library Association (and others) to the Children's Internet Protection Act ("CIPA") have resulted in an agreement with the Department of Justice that will ease PY4 compliance requirements for libraries. Important: The agreement does NOT apply to schools and does not deal with PY5 compliance issues.

Under current FCC rules, applicants receiving Internet access and internal connection discounts will be required, at a minimum, to certify that they are "undertaking such actions" in PY4 to comply with the CIPA filtering and policy requirements for PY5. For purposes of this certification, the government now agrees to interpret the "undertaking" language to allow a library – NOT A SCHOOL – to simply be "evaluating" its CIPA options for PY4. Under this interpretation, a library need not certify that it is actually moving towards PY5 compliance. Unless the library challenges on the constitutionality of CIPA are ultimately successful, this interim agreement will have no effect on PY5 compliance; libraries would have to either comply or forego PY5 E-rate Internet access and internal connection discounts.

The key reason for the distinction between libraries and schools is that libraries are subject to a different free speech standard than are schools. Schools have more latitude than libraries to restrict free speech if such restrictions serve an "educational purpose." This provides the libraries with a stronger case in attacking the constitutionality of CIPA.

Defining and Discounting Non-Recurring Services

With PY3 drawing to a close on June 30, it is important to make a distinction between recurring and non-recurring services. PY3 discounts for recurring services can only be used for services actually received between July 1, 2000, and June 30, 2001. For non-recurring services, the FCC recently extended the usage deadline to September 30, 2001, to give applicants the full summer to complete "PY3" installations. (Additionally, the FCC has proposed to allow the use of PY3 non-recurring funds, awarded after March 1, 2001, for a full extra year, i.e., through September 30, 2002.)

Recurring services are those that are provided on an ongoing basis. Examples would include telephone services, Internet access services, and maintenance. Most often these services are billed on a monthly basis, but some recurring services such as paging or Internet access may be billed quarterly or annually. Non-recurring services typically involve new system installations. Non-recurring services are more likely to be billed on a one-time basis, although particularly large installations may involve periodic progress payments.

From a processing standpoint, the way the SLD distinguishes between recurring and non-recurring service funding is by recording the category in which an expense was listed in Block 5 of the Form 471. Generally, recurring service discounts are listed as monthly charges in Item 23(A-E) whereas non-recurring service discounts are listed as one-time charges in Item 23(F-H).

Some funding requests may have both recurring and non-recurring components. One example might be a new telecommunications service involving an initial installation charge and ongoing monthly charges. If such a service was funded for PY3, but does not get installed by June 30, 2001, no discounts would be provided for monthly charges. E-rate coverage for non-recurring portion, however, would still apply if the service were installed before September 30.

COMAD Letters

Just what we need – a new acronym: COMAD stands for "Commitment Adjustment." The need for an adjustment arises when an actual E-rate payment is made to a vendor that, upon subsequent review, is determined to be excessive (whether by applicant, vendor, or SLD error). The SLD recently sent COMAD letters to 25-30 vendors requesting the repayment of funds from PY1 and PY2 invoice payments.

Note that the COMAD requests for repayment are to the vendors, not to the applicants. This simply reverses process in which all discounts payments flow through the vendors. In cases in which the discounts have already been passed on to the customers, the burden is placed on the vendor to bill the customers for the excess amounts.