E-Rate Central News for the Week
June 29, 2009
The E-Rate Central News for the Week, prepared for New York applicants by E-Rate Central, is sponsored by the New York State Education Department. Additional E-rate resources are on the E-Rate Central Web site and on the New York State E-rate site. We can be contacted by phone (516-832-2887), fax (516-832-2877), or through our Contact Us Web form.
FY 2008— FY 2009 Funding Status
Wave 10 for FY 2009 is scheduled to be released on Tuesday, June 30th, for $102 million, including $1.4 million for fifty New York applicants. Total FY 2009 funding is currently $553 million, including $28 million for New York. Only Priority 1 services for FY 2009 are being funded at this time.
Wave 58 for FY 2008 is scheduled to be released on Wednesday, July 1st, for $800 thousand - a very small wave for three applicants, including less than $16,000 for one New York school district. Total FY 2008 funding remains at $2.32 billion, including almost $372 million for New York. A decision has still not been made on the funding of Priority 2 services at 87%.
Comments on ESL for FY 2010
Initial comments on the proposed Eligible Services List ("ESL") for FY 2010 were due last Tuesday. Unlike the two previous years, which featured vendor-induced write-in campaigns supporting new eligibility for a couple of services, the responses this year were limited in number. Comments were received from a few individuals and consultants, a couple of large service providers, and three of the major E-rate organizations representing: (a) the applicants (the State E-Rate Coordinators Alliance, or "SECA"); (b) vendors (the E-Rate Service Providers Association, or "ESPA"); and (c) consultants (the newly-formed E-Rate Management Professionals Association, or "E-mpa").
As is the purpose of the annual ESL comments, most of the responses limited themselves primarily to proposed clarifications and/or procedural issues associated with currently eligible products. Indeed, one important suggestion made by Funds for Learning ("FFL") is that the final version of the ESL should clearly distinguish between eligibility "changes" and "clarifications." Too often, in the past, auditors have interpreted expanded product eligibility lists as an indication that an additional service had not been eligible in the past. This year's ESL, for example, specifically includes Ethernet, which has always been eligible, in the list of eligible digital transmission services.
Some of the comments we found most interesting and/or useful are summarized below:
| Administrative Fees |
Both SECA and E-mpa noted the proliferation of various telecommunications taxes and surcharges, often buried deep within multi-page invoices. Not only is it time-consuming to find them, but it is difficult to determine which are eligible or ineligible. All such charges should be deemed eligible or, at a minimum, the ESL should clearly state that only administrative fees applied solely to E-rate customers are ineligible. |
| E-mail Archiving |
ESPA and FFL both commented on the currently unworkable distinction made between eligible storage required to maintain a functioning e-mail system and ineligible storage for longer-term archiving of e-mail messages. ESPA essentially recommended that only separate and identifiable archiving storage be deemed ineligible. |
| Internet2 |
E-Rate Central suggested the specific inclusion of Internet2 access as an eligible form of Internet access. Currently, USAC treats any Internet2 charges, other than associated telecommunications circuit charges, as ineligible. The current ESL, however, lists Internet2 "fees" and "membership dues" as ineligible -possibly both referring only to the Sponsored Educational Group Partnerships ("SEGPs") fees. |
| Software Licenses |
Agreeing with the noncontroversial position that user licenses for eligible equipment are eligible, E-mpa recommended that annual, subscription-based, user licenses be included in the Basic Maintenance of Internal Connections category. Such licenses are currently eligible only in the Internal Connections category and are thus subject to the Two-in-Five Rule funding restrictions. |
| VoIP |
E-mpa and FFL recommended further clarification of the eligibility of interconnected VoIP equipment on customer premises. Although USAC provided such clarification in its SLD News Briefs earlier this year, some VoIP providers continue to allege that all such equipment may be provided as a part of a managed, Priority 1, VoIP service. |
| Warranties |
E-mpa and FFL also recommended that annual charges for unbundled equipment warranties be treated as fully eligible within the funding year. Although such warranties are deemed eligible as a recurring service under the Basic Maintenance of Internal Connections category, USAC will only fund a portion of the annual warranty fees associated with equipment installed midyear. |
| Web Hosting |
Both SECA and E-mpa expressed concern with the seemingly ever-expanding definition of eligible Web hosting services. Based on FCC guidance, USAC recently included the hosting of intranet and password-protected Web pages as eligible. At the same time, USAC used its SLD News Brief series to further define the portion of online application services that could be allocated as eligible Web hosting. The apparent strictness of these allocation guidelines, however, is belied by the high eligibility percentages approved by USAC in the many cases of specific application services. E-mpa asked that USAC's methodology for cost-allocating Web hosting be made more transparent. |
Copies of submitted comments in this proceeding can be found in the Search for Filed Comments section of the FCC Web site. To find comments on this and other E-rate matters, enter "02-6" in the Proceeding box at the top left-hand corner of the search screen.
Reply comments on the draft Eligible Services List ("ESL") for FY 2010 are due this Tuesday, June 30th.
E-Rate Updates and Reminders
Two New Bills Introduced:
Although many bills are introduced and few are enacted, we were intrigued with the E-rate implications of two new bills recently proposed in Congress.
Senator Sherrod Brown (D-OH) proposed to mandate the automatic enrollment of children on Medicaid or State Children's Health Insurance Program rolls in school meal programs. Such a mandate would supplement the current process permitting direct certification for free meals for children of households eligible for Food Stamps or Temporary Aid for Needy Families ("TANF"). For information on the existing direct certification program, see our newsletter of July 14, 2008.
Representative Henry Cuellar (D-TX) proposed an amendment to the Universal Service language of the Telecommunications Act of 1996 to include Head Start agencies in the definition of elementary and secondary schools. Currently, Head Start is deemed eligible for E-rate in New York and some other states based on those states' definitions of elementary education. We note that a similar inconsistency in the E-rate eligibility of pre-K students and facilities could be rectified with similar federal legislation.
Treatment of Multi-Location Schools:
A long-unresolved question has been whether a school operating out of two or more locations should (or could) file its E-rate applications as a single "school" with a single (Billed) Entity Number, or file as a "district" with entity numbers for each location. In the earlier days of E-rate, at least in New York, many of these applicants filed as single schools. Only when USAC began focusing more closely on the actual locations to which services were being provided, did it begin pushing these schools to obtain entity numbers for their other sites and to file as "districts." Actual public school districts may have similar problems with building annexes which are not recognized by their states as separate schools.
From both applicant and USAC viewpoints, there are advantages and disadvantages of both approaches involving such issues as discount rate calculations, entity validation, NSLP validation, product and service delivery, and Two-in-Five Rule eligibility.
E-Rate Central filed FCC comments on these issues last week in support of an appeal by a private school in Buffalo, NY. The filing encourages the FCC and/or USAC to clearly define the preferred approach (or permit options for both), support it with appropriate procedures, and ensure that no school is penalized retroactively.
FCC Confirmations and Nominations:
The Senate confirmed Julius Genachowski as the new Chairman of the FCC and confirmed Robert McDowell for another term as Commissioner. Commissioner nominations of Meredith Attwell Baker and Mignon L. Clyburn were also announced last week which, if confirmed, would bring the Commission back to its full five-member strength.
Dallas E-Rate Settlement:
The Department of Justice issued a press release on Friday announcing a settlement with the Dallas Independent School District. The case involves alleged procurement violations including contentions that school district officials improperly received gratuities from technology vendors, including trips, meals, golfing and the free use of a yacht. Dallas' former Chief Technology Officer was convicted in 2008 on bribery charges.
As a result of these activities, Dallas has not received E-rate funding since FY 2004. Dallas' pending requests in the interim total almost $391 million. As a part of the settlement, Dallas agreed to relinquish more than $150 million of these requests and to pay a total of $750,000.
July 1st Reminders:
The new funding year, FY 2009, begins on Wednesday, July 1. As we have been reminding applicants with current technology plan approvals expiring on Tuesday, June 30, newly updated plans must be approved to cover at least the full 2009-2010 year. Except for a limited number of "basic telephone" services, E-rate discounts cannot be provided for FY 2009 services received before technology plans are approved.
Applicants funded for FY 2009 in Waves 1-10 for services to begin July 1st (and who have approved technology plans as per the preceding paragraph) can now file Form 486s without using the early filing option (which required an Item 6a check-off).
The SLD's latest News Brief of June 26, 2009, is a follow on of last week's newsletter, this time providing service provider answers to the question "What Should I Be Doing This Summer?" The SLD provided nine of the following ten answers:
- Verify your online access to the E-File System.
- Review your Form 498 and update any information that has changed. This is particularly important at this time of year since applicants will begin filing year-end BEARs and will be using the contact information specified in the Form 498.
- Monitor the progress of any paper forms you submit to USAC.
- Complete your activities related to billing customers and invoicing USAC for any remaining FY 2008 recurring services.
- Always apply sun block to any uncovered areas when spending time outdoors.
- Log in to the E-File System at least once a week to check for BEAR Forms filed online.
- Assist applicants with responses to PIA review questions if asked.
- Review FY 2010 Form 470s filed by applicants.
- Label and file program-related documents.
- Consider attending applicant training in the fall.
