Outline of FCC Draft E-rate Reform Order Released

June 24, 2014

On Friday, FCC Chairman Wheeler circulated his draft E-rate reform proposal to the other four FCC Commissioners ahead of the expected July 11 vote. Although we are not privy to the exact contents of the draft proposal, the Chairman released the attached 1-page high-level outline of the current draft proposal. Below is a copy of the summary, with my editorial comments below certain bullets in blue italics. The reform proposal is likely to change somewhat before the vote and I will keep you posted in the coming weeks. It’s also likely that if the order passes on July 11, we may not see the text of the full order (which could be several hundreds of pages) for several weeks after that.

• Commit at least $1 billion in support to Wi-Fi next year to connect over 10 million students across the country in 2015, followed by another $1 billion in 2016 with predictable support continuing in future years.
• Provide multi-year funding predictability to ensure widespread and equitable distribution of support, and stop cutting rural schools out of Wi-Fi funding.
– Priority 2 eligible services will be transformed into ‘Category 2′ with a specific set of funding available each year. The focus will be solely on WIFI and internal connections wiring.
– The term ‘predictability’ could suggest they are considering a per-pupil cap, where each school could apply for Category 2 support up to their per-pupil cap. Once the per-pupil cap is exhausted, they couldn’t apply again for a period of at least 5 years or until everyone has been funded.
– There are approx. 55 million students in the U.S., so at a rate of 10 million students/year, and the usage of a per-pupil cap, we could expect that all schools and libraries should receive WIFI internal connections funding in the next 5 years.
– The libraries likely would have a separate Category 2 funding mechanism that may be based on a formula based on square footage of the library as opposed to a per-patron or per-pupil formula.

• Begin a multi-year transition of all program funding to broadband, by gradually phasing down support for non-broadband services.
– Some services such as paging likely will be eliminated beginning with FY 2015, and other services, such as all voice/cellular, would be phased out gradually. The fate of webhosting remains uncertain.

• Adopt clear broadband goals to measure overall program success, while maintaining local flexibility to determine the needs of individual schools and libraries.

Make E-Rate Dollars Go Farther:
• Set the maximum program match at 4 to 1 – which means for every dollar the poorest schools spend, the program will spend four – for Wi-Fi services to promote cost-effective decision-making.
– For Category 2 equipment/services (WIFI equipment and wiring), the maximum discount will decrease from 90% to 80%. It’s unknown whether all discount bands will be adjusted downwards by 10% or if just the 90% discount band will be reduced.

• Speed consortium applications to drive down prices.
– This is already occurring as many of our IU RWANs have discovered!

• Increase transparency on how E-rate dollars are spent and on prices charged for E-rate services.
– The FCC intends to make public the amount each applicant is paying for broadband and for Internet in an attempt to provide leverage to applicants during their competitive bidding process.

• Leverage GSA pricing so schools can buy for less.
– We’re unsure whether this means that schools and libraries will be able to purchase Category 2 equipment from the federal GSA contract, or whether the program intends to use the GSA pricing as the price ceiling that USAC will approve for equipment. If applicants can purchase directly from the GSA contract, it’s also unknown whether they would still be required to post their own 470′s.

Deliver Faster, Simpler, More Efficient Applications and Other Processes
• Fast, simple process for multi-year applications.
• Expedited process for small dollar, cost-effective applications.
• Speed review of all applications.
• Move to electronic filing of all documents.
• Simplify discount calculations.
– We believe they may be considering district-wide average discounts instead of a weighted average discount. So if a school district has 2500 total students, and 1000 NSLP eligible students, they would have a 40% NSLP eligibility percentage, which is a straight 60% discount. No district would ever have a discount that isn’t straight from the discount matrix (meaning, no more 58%, 59%, 61%, etc). This is the same as how libraries currently calculate their discounts.

• Zero tolerance for fraud or abuse: toughen document retention and site inspection rules.

– Julie

Julie Tritt Schell
PA E-rate Coordinator

717-730-7133 – o
717-730-9060 – f

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