The new guidance further clarifies the general proposition that, with limited exceptions, equipment located on an applicant’s premise is eligible for E-rate discounts only as Priority 2 (i.e., Internal Connections). To be treated as Priority 1 (i.e., Telecommunications or Internet Access), the equipment must meet a series of strict criteria (the so-called “Tennessee” test). The SLD has again tightened these criteria.

Earlier this year, the exclusive use criteria was expanded beyond contractual limitations to read: “There is no contractual, technical, or other limitation that would prevent the service provider from using its network equipment in part for other customers.”

With the latest revision, the SLD has focused on the requirement that there be a single dividing line between local area (Priority 2) and wide area (Priority 1) network equipment. In particular:

(1) “…on-premise components such as network hubs and network switches that are used to distribute transmissions to multiple locations within a local area network would not meet [the Priority 1] requirement, because if they were removed then the communication paths among the various network points would be broken. Similarly, a PBX that routes calls within a school or library would not be eligible for support as Priority 1 on-premise equipment.”

(2) Priority 1 service must have a “specific demarcation” point for connection to an applicant’s internal network. Wiring or equipment “…that connects multiple locations within a school or library is inherently a part of the local network.”

(3) The demarcation point rule explicitly recognizes that “…Priority 1 service charges may include the cost of leasing a single basic terminating component, such as a CSU/DSU” (or cable modem). It is important to recognize that each word in the phrase “single basic terminating component” is intended to be taken literally.

One interesting implication of the tightened Priority 1 criteria is that it may help define the minimum hardware requirement needed to avoid having a fiber optic WAN be considered a “dark fiber” system (which, under new FCC rules, is E-rate ineligible as of FY 2004). If most of the on-premise switching equipment in a fiber system is to be considered non-telecommunications Priority 2, then the critical telecommunications component should be the “TX to FX Converter,” the modulating component that converts electronic cable signals to optical fiber signals, and vice versa. These basic terminating fiber optic components (called “Gigabit Interface Converters,” or “GBICs,” in the Cisco lexicon) are relatively inexpensive devices. Additional guidance on this specific issue is expected from the SLD or FCC shortly.

Recommended worksheets for logging vendor bid responses and for documenting the vendor selection process (when two or more bids are received), together with instructions for use, are available on the E-Rate Central web site.

When pressed, we reluctantly explain that a Form 470 must be filed at least 28 days before filing a Form 471. Since the Form 471 deadline for FY 2004 is February 4, 2004, the absolute deadline for posting a Form 470 is 28 days before, i.e., January 7th.

But please remember:

(1) The Form 470 must be posted on January 7th. If the Form 470 is not completed online, but is merely mailed on that date, it will be too late.

(2) Posting a Form 470 on January 7th means that all contracts must be signed, and the Form 471 must be filed, on one day, February 4th. There is no room for error!

(3) The Form 470 is an easier form than the Form 471. It makes absolutely no sense to put off filing a Form 470 for weeks on end, but give yourself only one day to file a Form 471.

(4) The sooner you file a Form 470, the sooner you can file a Form 471.

(5) The sooner you file a Form 471, the sooner the SLD can begin reviewing your application. The review of FY 2004 Form 471s is scheduled to begin this Monday, December 8th. If, the SLD finds a critical problem while reviewing a Form 471 before the end of January, the applicant may still have time to file a corrected application.

Please, please, do not wait until the last day to file either a Form 470 or Form 471.

The SLD is now indicating to applicants considering multi-year contracts, not only may that they provide that information, but that they must. At a minimum, we recommend including language such as: “Contracts based on this posting may be awarded on an annual, multi-year, or renewable term basis.”

Libraries that filed Form 486s for Internet Access and/or Internal Connection services before the effective date of the Supreme Court’s CIPA decision in mid-August are reminded that their earlier Form 486s have been cancelled and that new Form 486s (using the August 2003 version) must be filed within the same deadlines.

Applicants, who have filed Form 486s but have not yet received SLD confirmation, should be receiving their notification letters shortly. The annual Form 486 processing backlog, which typically occurs around the first major deadline of October 29th, should be cleared up this month.