• FCC Formalizes September 30 Extensions for Non-recurring Services
• FCC Retains Pro Rata Allocation for Internal Connection Discounts
• SLD Training for Vendors

The following is a summary of the E-rate News for the Week of June 25, 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.

FCC Formalizes September 30 Extensions for Non-recurring Services

On June 29, the FCC released its decisions on extended deadlines for utilizing non-recurring service discounts and on the allocation scheme to be used in PY4 to fund internal connection services for high discount applicants. The decisions follow a Notice of Proposed Rulemaking ("NPRM") on these topics that was issued two months ago. A copy of this decision can be found at the FCC's Web site.

The FCC decision extending the periods for utilizing non-recurring services discounts is designed to provide schools and libraries with at least one full summer to utilize any awards for new service installations. The decision parallels and generalizes previous extensions granted for PY2 and PY3.

It is important to stress that the decision affects only non-recurring services. Discounts for recurring services (e.g., for telecommunications and Internet access) can be applied only to services actually used during any actual funding year ending June 30.

As a general rule, the FCC decision gives every applicant an additional three months, until September 30, after the end of any funding year to utilize non-recurring service discounts. Thus, non-recurring discounts for PY4 (not yet awarded) can be used through next summer until September 30, 2002. The FCC had already authorized the use of PY3 non-recurring funds through September 30, 2001.

Recognizing that the extra three months may still not provide a sufficient installation period for applicants experiencing unusual delays in receiving or utilizing funding awards, the FCC further established four conditions that could qualify applicants for an additional one-year extension until September 30 of the following year. Specifically, the FCC authorized the SLD to extend the implementation deadline for non-recurring services if an applicant's situation satisfies one of the following criteria:

• The applicant's funding commitment decision letter is issued by the SLD on or after March 1 of the funding year for which discounts are authorized;
  
  
• The applicant receives a service provider change authorization or service substitution authorization from the SLD on or after March 1 of the funding year for which discounts are authorized;
  
  
• The applicant's service provider is unable to complete implementation for reasons beyond the service provider's control; or
  
  
• The applicant's service provider is unwilling to complete installation because funding disbursements are delayed while the SLD investigates their application for program compliance.
  

For the first two conditions - which are the most common causes of delay - the key date for resolution of a funding award is March 1. Funding after March 1 qualifies applicants for the following year's September 30 installation deadline. As a result of this decision, we expect that the SLD will quickly confirm an installation deadline of September 30, 2002, for applicants who were awarded out-of-the-window PY2 funds last April (as indicated in footnote 17 of the FCC decision) and for applicants who have recently, or are still awaiting, formal funding commitments as a result of successful PY3 appeals.

The last two conditions, that may involve more subjective judgments of applicability, will be applied on a case-by-case basis. Applicants seeking extensions based on these criteria must make their requests to the SLD on or before the normal installation deadline.

FCC Retains Pro Rata Allocation for Internal Connection Discounts

The total demand for E-rate funds for PY4 is more than double the annual $2.25 billion level of available funds. When demand exceeds supply, as it also did in PY1 and PY3, the FCC's funding rules provide for first funding all requests for Priority One services (telecommunications and Internet access), then allocating the remaining funds to Priority Two service (internal connections) requests for the neediest, highest discount, applicants.

The problem in PY4 is that not enough funds are available to fully meet the Priority Two needs of all 90% applicants, much less those of any other applicants. When funding is insufficient to meet the needs of any given discount rate band, FCC rules call for pro rating the remaining funds. Concerned that less than full funding might be problematic for 90% applicants, who might be unable to afford more than their 10% share, the FCC's NPRM asked for comments on a rule change that would give full Priority Two funding only to those high discount applicants who had not received internal connection funding in PY3.

Based on the prevalence of comments arguing that it would be unfair to change funding rules after applications had been submitted, however, the FCC has decided to retain its existing pro rata allocation rules. This decision (plus FCC and OMB approval of a revised Form 486 that is expected shortly) clears the way for the SLD to begin issuing PY4 funding commitments before the end of July. The funding and timing implications are as follows:

• All valid requests for Priority One, telecommunications and Internet access, services will be funded for all applicants, regardless of discount rate.
• The first waves of funding, beginning in the latter half of July, are likely to involve predominantly those applications that include only Priority One requests.
• Subsequent funding waves in August and September will begin addressing applications below the 90% level that include both Priority One and Priority Two requests. Since Priority Two funding will not be available below the 90% level, these funding commitment letters will indicate that all such requests are "Not Funded."
• Funding for applications that include Priority Two requests at the 90% discount level will not occur until later in the fall after most applications have been reviewed and an accurate pro rata allocation can be made of the remaining funds for internal connections. Currently, the best estimate of internal connection funding is the one provided in a SLD analysis released in mid-May that projected a 73% pro rata percentage. At this level, "90%" applicants could expect to receive an effective discount of 65% (i.e., 73% of 90%).

SLD Training for Vendors

An announcement is expected from the SLD later in July regarding two national training sessions to be held for service providers. One session is expected to be held in Seattle later in August; another is being planned for Washington, D.C. in late September or October. The workshops will focus on SLD-vendor communications, invoicing, and program compliance responsibilities.

Applicant E-rate training is largely the responsibility of the individual states. NYS sessions, conducted by E-Rate Central, have historically been held in the October-November timeframe. Assuming timely renewal of NYSED's E-rate support contract, expiring 6/30/01, a similar series of workshops will be planned for this fall.