FY 2014 Priority 1 E-rate Demand Decreases 2.9%

April 23, 2014

~ 99.8% of PA Districts Applied! ~

The SLD has released their FY 2014 funding analysis showing that for the first time in several years, demand for Priority 1 services decreased by 2.9% to $2.630 billion. Demand for Priority 2 equipment and services also decreased slightly. My overall analysis is that all Priority 1 requests will be fully funded, but funding for Priority 2 requests will be entirely reliant on whether the FCC chooses to allocate unspent funds from previous years to pay for requests at the 90% level. Below is a granular look at the nationwide and Pennsylvania demand data.
Demand for Priority 2 at the 90% level is $1.76 billion. Without significant rollover from unused prior years’ funding, the fate of Priority 2 90% requests remains uncertain. My analysis is below, as well as a granular look at the nationwide and Pennsylvania data.

1) Priority 1 Demand: P1 demand (telecommunications services and Internet access) is $2.630 billion, a decrease of 2.9% from last year (P1 demand had been increasing by double digits in the last two funding years). In March, the FCC adjusted the annual E-rate cap for inflation and set the cap at $2.413 billion for FY 2014. After USAC removes duplicate requests and ineligible service requests, there likely will be a small deficit of about $150 million will take care of by the FCC in a rollover announcement. Again this year the entire E-rate fund is being consumed by demand for Priority 1 services. The FCC realizes this is a problem and is in the process to modernization the E-rate program to ensure enough funding is available for broadband and Internet requests and provide more funding for broadband equipment.
2) Priority 2 Demand: P2 demand (internal connections and basic maintenance of internal connections) is $2.194 billion, an overall decrease of 3.6% from last year which is likely due to the fact that applicants below 90% didn’t bother applying. The more important figure is the demand at the P2 90% level — $1.674 billion (a 4.9% decrease from last year). With the entire $2.413 billion fund consumed with Priority 1 services, the only way any Priority 2 funding at the 90% level will be funded is with rollover funds from prior years. As of February 1, USAC reported to the FCC that only $450 million had been identified as available for rollover. This figure will increase as two more quarters’ rollover funding will be added, but it likely won’t exceed $750 million, especially considering they will need about $150 million to fully fund Priority 1 requests. This will leave a sizable deficit in Priority 2 funding and very much assures that no Priority 2 requests at 89% and below will be funded for FY 2014. The fate of Priority 2 requests at the 90% level are entirely dependent on whether the FCC decides to earmark for FY 2014 some of the $2 billion they are slated to invest in E-rate reform in FY 2015 and 2016.
3) Nationwide Applications: A total of 45,189 Form 471s were received (542 more than last year). 98.3% of applications were filed online and 81.6% of Form 471s were certified online.

4) Pennsylvania Applications: In PA, 5332 FRNs were filed (159 less than last year), by 1256 different entities (14 more than last year). In fact, only 1 public school district did not apply, which represents participation rate of about 99.8% — a new record! This is one of the highest participation rates in the nation and likely the highest among the largest states. Although 1 PA school district did not apply, that District indirectly receives E-rate funding through their participation in their IU’s Regional Wide Area Network E-rate applications. Thus, 100% of PA public school districts receive funding from E-rate. In FY 2013, Pennsylvania’s non-participation rate was .04%, with 1% in 2012, 1.2% in 2011, 1.4% in 2010, 2% in 2009 and 5% in 2008 — a good trend.
5) Pennsylvania Demand: Pennsylvania applicants have requested $ $106,153,120.33, consisting of $68,155,287 in Priority 1 services (an increase of $1,166,449), and $34,992,900 for priority 2 services/equipment (an increase of $5,944,865). $36,177,963 was requested for P2 services/equipment at the 90% discount level.
6) Detailed Demand Estimates: The nationwide breakdown by service category, compared with FY 2013, is provided below. A more detailed breakdown of the SLD’s demand estimates for FY 2014 is available at: http://apps.fcc.gov/ecfs/document/view?id=7521098605.
FY 2014 FY 2013
Telecommunications Services $1,759,869,093 $1,919,171,036.92
Internet Access $870,387,744 $790,280,426.56
Internal Connections $1,978,389,842 $1,996,053,653.99
Basic Maintenance $216,081,794 $280,485,259.27
Total Demand $4,824,728,475 $ 4,985,990,376.74
As always, if you have any questions, please let me know.

– Julie

Julie Tritt Schell
PA E-rate Coordinator

717-730-7133 – o
717-730-9060 – f

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