| E-Rate News for the Week |
| November 22, 2004 |
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The E-Rate News for the Week, prepared by E-Rate Central, is sponsored by the
State E-Rate Coordinators’ Alliance (“SECA”). Official SLD news is provided in
the "Important Notices" section of the
SLD’s Web site. Additional E-rate information and archived copies of
this newsletter are located on the E-Rate
Central Web site. |
| Ramping Up for New Funding
Commitments |
| The SLD has indicated that small funding
commitments associated with FY 1999 and FY 2000 appeals were issued last week,
and that a larger set of commitments for FY 2001, FY 2002, and FY 2003 will be
released this week. This is the first crack in the funding freeze that has been
in effect since August 3rd. Funding for FY 2004 should resume within the next
couple of weeks. |
| Planning for the New "2 in 5"
Internal Connections Rule |
Beginning next year, funding for new Internal
Connections ("IC") services will be available, on an entity-by-entity basis, in
only two out of any five sequential years. The new "2 in 5" rule was designed
by the FCC to discourage higher discount applicants from requesting and
receiving Internal Connections discounts year after year, while other lower
discount applicants were being denied any Priority 2 funding. Although the new
rule is simple in concept, its implementation may prove vexing to many
applicants. Careful planning will be important. Here are some key points and
potential pitfalls:
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Only IC equipment funded in FY 2005 and subsequent years is covered by the
rule. Funding for any previous year does not count.
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The amount or use of the IC funding does not matter. A year of funding is a
year of funding. A school that is funded for an inexpensive router in FY 2005
and an expensive PBX in FY 2006, for example, will be ineligible for IC
equipment funding for the next three years. Spreading out work over more than
two years, therefore, is not practical. As such, we expect to see a jump in the
demand for Priority 2 services next year, further limiting the availability of
IC funding to the higher discount applicants.
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Basic IC maintenance is exempt from the rule and may be funded every year. The
new Form 471 includes a separate category check box for basic maintenance. If a
service is just for maintenance, it must be marked as such to avoid having it
count as one of the two years of allowable funding.
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Leasing of IC equipment is NOT exempt. We believe that failure to exempt leases
may have been an oversight and, as such, may yet be corrected. At the moment,
however, only two years of a lease starting in, or continuing into and through,
FY 2005 would be funded.
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The rule applies on a site-by-site basis, not on an applicant basis. If funding
is provided on a site-specific basis, it counts as one year for that site
alone.
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If, however, funding is provided under one FRN for all or a portion of an
applicant's entities (i.e., if the FRN references a Block 4 Discount
Calculation Worksheet with multiple entities), all of those entities will be
deemed to have been funded in that year. This is true even if IC equipment is
NOT actually purchased for some of the sites! There are several implications.
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In the past, some applicants have grouped multiple entities (perhaps those with
similar discount rates) into a single funding request even if work was not
planned for some. This simplified the application process and provided some
flexibility by delaying a decision as to which sites actually needed the work.
This is no longer a viable strategy.
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If a district purchases a new WAN switch serving all of its schools, for
example, which is funded at the district's aggregate discount rate, it will
count as one year of funding for every one of the district's entities.
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The multi-entity funding problem extends to consortium applications. If a
consortium is funded for IC equipment on behalf of a number of districts, it
will count as one year of funding for all the entities in all the associated
districts. As a result, district and consortium IC applications must be
carefully coordinated.
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Although not explicitly stated in the FCC rules, it appears that funding for an
individual FRN, which is subsequently canceled via a Form 500, will not be
counted for that year once the Form 500 has been filed and processed by the
SLD.
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The new "2 in 5" rule places a premium on site-specific installation planning,
particularly for high-discount applicants. Please do not wait until the closing
days of the Form 471 application window to try to develop an optimal filing
strategy.
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| 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. |
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