In This Week's Issue:
»	FY 2007 Funding Status and the Internal Connections Conundrum
»	Schools and Libraries News Brief for March 21st

E-Rate Central News for the Week
March 24, 2008

The E-Rate Central News for the Week is prepared by E-Rate Central. E-Rate Central specializes in providing consulting, compliance, and forms processing services to E-rate applicants. To learn more about our services, please contact us by phone (516-832-2880) or by e-mail. Additional E-rate information is located on the E-Rate Central Web site.

FY 2007 Funding Status and the Internal Connections Conundrum
Wave 43 for FY 2007 is scheduled to be released on Tuesday, March 25th. Funding in this wave is expected to be about $15 million. This will bring the cumulative national FY 2007 funding total to $2.03 billion.

Internal Connections are still being funded at discount rates of 83% and above, and are being denied at 79% and below. Information provided last week by the SLD, however, indicates that the uncertainty of funding at the 80-82% has also delayed funding of certain applicants with pending requests at higher discount rates. The explanation for this delay is a bit complex and requires some background.

Many applicants (typically school districts) file Internal Connections applications with funding requests at different discount levels to account for different schools (or groups of schools). Historically, when the final Internal Connections funding threshold has not been set (as is currently the case for FY 2007), the SLD would issue Funding Commitment Decision Letters ("FCDLs") on these applications approving FRNs at discount levels that are being funded and denying FRNs at discount levels that are definitely not being funded. For valid FRNs in the middle - i.e., those in the uncertain discount range - the FCDL status would show "As Yet Unfunded." The advantage of this approach is that affected applicants would receive approval of their higher discount requests, while awaiting a decision on the final threshold level.

Recently this has not been the case. FY 2007 applicants with pending Internal Connections applications with funding request levels ranging from 80% to 83% and above have not been getting FCDLs. The problem traces back to early December. As the SLD was getting ready to release Wave 34, it announced that there was not enough funding available to cover Internal Connections requests at the 80% level and that it was going to start denying Priority 2 requests at this level. At roughly the same time, the FCC initiated an internal inquiry to determine the feasibility of providing additional FY 2007 funding that would permit Internal Connections funding down to 80%. To provide time to make this decision, the FCC instructed the SLD to hold off issuing 80% denials.

Unfortunately, the FCC's instructions to the SLD were received after the SLD had already updated its FY 2007 funding database to reflect the denial of pending Internal Connections requests at the 80% level. Although FCDLs with these denials were not sent out, the SLD's internal database continues to show these FRNs as "Not Funded." There is apparently no easy way to reverse the status of these FRNs without potentially reversing the status of earlier 80% requests that had been denied earlier for other reasons.

The SLD's systems and/or procedures are somewhat inflexible, so the SLD is now in a bind. Without a laborious effort to reset the affected 80% FRNs — apparently on an FRN-by-FRN basis — it cannot issue FCDLs containing any valid FRNs for 80% Internal Connections requests. If it did so without the corrections, those requests would be labeled "Not Funded," rather than "As Yet Unfunded." If the FCC ultimately decides that Internal Connections at 80% can be funded, the SLD will have to make these changes. But it appears unwilling to undertake a similar effort to reset the status to "As Yet Unfunded" until the FCC acts.

Our sympathies in this situation lie with the SLD and the affected applicants. The FCC needs to make a decision.

Schools and Libraries News Brief for March 21st
The SLD's March 21st News Brief provides an overview of the Program Integrity Assurance ("PIA") application review process. It focuses specifically on issues related to the eligibility of products and services, most importantly:

• Conditional eligibility
• Partial eligibility
• Ineligibility

Regarding partial eligibility - situations requiring cost allocations - the SLD provided the following four useful examples or suggestions:

• "For products that have multiple purposes, you can assume that each purpose represents an equal share of the cost. For example, if a file server is used as an email server (eligible), a firewall server (eligible), and an archive server (ineligible), you can allocate two-thirds of the cost for eligible uses and one-third for ineligible uses.
• "Products and services that support equipment that is partially eligible should reflect that partial eligibility. For example, if the equipment supported by an Uninterruptible Power Supply (UPS) is 60% eligible, the UPS can be considered 60% eligible as well.
• "You can produce usage statistics to allocate services that are accessible from both eligible and ineligible locations. For example, say that a telecommunications service is accessible from both a school administrative office (eligible) and a residential facility on the school grounds (ineligible). You can allocate costs for the percentage of the usage for the school administrative office and the residential facility based on documentation of current usage.
• "Check with your service provider to see if USAC has already made a determination about cost allocation for a product or service based on information previously submitted to USAC by the service provider."