E-Rate Central: E-rate News Archive 2002

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E-Rate News for the Week

November 25, 2002

Wave 17 Funding for FY 2002
Canceling FRNs for Questionable Vendors

The E-rate News for the Week, prepared by E-Rate Central, is sponsored by the Council of Chief State School Officers ("CCSSO") and made possible by a grant from the AT&T Foundation. Official SLD news is in the "What's New!" section of the SLD's Web site . Additional information is on the State Education Telecommunications Alliance's ("SETA") Web site.

Wave 17 Funding for FY 2002

Wave 17 of Funding Year 2002 will be released on Tuesday, December 3. Total funding in this Wave is approximately $96 million for 200 applications. The cumulative total for FY 2002 is now $1.56 billion for over 27,830 applications.

Internal Connection funding is being provided only for applicants at the 90% discount rate. No Internal Connection funding is available below 80%. The availability of Internal Connection funding for discounts in the 80-89% range cannot yet be projected, but requests for funding in this range are currently being reviewed by the SLD.

Canceling FRNs for Questionable Vendors

In our E-rate News for the Week of October 7th (see the weekly news archive in the E-Rate Central Web site), we again discussed questionable supplier practices and indicated that a number of applications, including some from FY 2001, were being held by the SLD pending ongoing investigations.

Since many of the pending applications include funding requests ("FRNs") for services from multiple vendors, we have begun receiving inquiries from applicants wishing to voluntarily cancel FRNs associated with questionable vendors in hopes of obtaining approval for the other, less controversial, FRNs. While this may be a viable strategy, there are several issues involved.

(1)	There is no clear way to identify vendors that are under investigation or FRNs that may be delaying application approval. One way to check on "questionable" vendors is to use the Data Request Tool on the SLD Web site, as discussed in our October 7th newsletter, to see if an unusually high percentage of FRNs associated with a given vendor are being denied or delayed.
(2)	If the services in question have not been used, because E-rate discounts have not yet been awarded, there is little risk to canceling questionable FRNs. If the services are still needed, they can be applied for again - with a new vendor - for FY 2003. If the services have been used, canceling the FRNs is more risky because it eliminates any possibility of E-rate discount reimbursements if the FRNs are ultimately approved.
(3)	Canceling FRNs - or entire Form 471 applications - provides clear benefits to the E-rate program as a whole because it frees up funding that is being held in reserve pending the completion of vendor investigations. The SLD may be able use these additional funds to bring Internal Connection funding down to lower discount rates.
(4)	There is no assurance that canceling problematic FRNs on a pending application will mean that any other FRNs will then be funded. The SLD may believe that interactions between a questionable vendor and an applicant have tainted the entire competitive bidding process. Thus, even otherwise uncontroversial FRNs for services from traditional telecommunications and Internet access providers may be compromised.
(5)	Before canceling any FRN, make sure that the action does not result in a breach of contract with the service provider. Unexpired contracts, particularly those that are contingent upon E-rate funding, should be reviewed with special care.

There are several ways to cancel one or more pending FRNs. If the application is currently in active review by the SLD, a request can be made to the PIA reviewer and confirmed in writing. If the application is not being reviewed, an applicant can cross out the relevant FRNs on the Form 471 Receipt Acknowledgment Letter ("RAL"), marking each with the word "CANCEL," and mail or fax a copy back to the SLD as per the instructions on page two of the RAL. Alternatively, a separate FRN cancellation request can be sent to the SLD by mail (FRN Cancellation, Box 125 - Correspondence Unit, 80 South Jefferson Road, Whippany, NJ 07981) or fax (973-599-6542).

If there are FRNs on the Form 471 in question that are not being canceled, we strongly recommend that any correspondence with the SLD include a certification - if true - that the vendor(s) associated with the canceled FRNs played no role in the selection of the remaining service providers. This may help alleviate the 4th issue discussed above.

Disclaimer: This newsletter may contain unofficial information on prospective E-rate developments and/or may reflect our own interpretations of E-rate practices and regulations. Such information is provided for planning and guidance purposes only. It is not meant, in any way, to supplant official announcements and instructions provided by either the SLD or the FCC.