FCC New Rules on Internal Connections:
** Limit Funding Years for Internal Connections
** Restrict Scope of Maintenance Services
** Limit Transfer of Equipment
Message Posted January 10, 2004
2/5 RULE ON INTERNAL CONNECTIONS
The FCC has ruled that, beginning in Funding Year 8 (2005-2006), Internal
Connections funding will be limited to twice over any five year span. The
new rule is designed to discourage schools and libraries from replacing or
upgrading equipment every year, and limit abuse of program funds. The 2/5
rule will NOT include maintenance of Internal Connections equipment;
discounts on “basic” maintenance service may be applied for every year. The
Form 471 for FY 2005 will be revised to include a separate maintenance
category, but will still be considered a priority 2 service.
The funding limitations will apply on a site-by-site basis -- not a district
or library system basis -- and will presumably be administered using the
entity or worksheet references on Block 4 and/or Block 5 of the Form 471.
Also, this rule pertains to funding, not application. So if a 70% school
applies for internal connection but isn't funded, that year wouldn't count
as one of their 2 years. Similarly, if a school is funded, but cancels the
funding request and does not use any of the funding, that year also wouldn't
count as one of the 2 years.
***
NEW LIMITS ON 'MAINTENANCE'
As a result of significant abuse by applicants and service providers, the
FCC also has ruled that, beginning immediately, they are significantly
restricting what is considered 'basic maintenance.' The new FCC rules
specifically state, “On-site technical support is not necessary to the
operation of the internal connection network when off-site technical support
can provide basic maintenance on an as-needed basis. Services such as
24-hour network monitoring and management also do not constitute basic
maintenance.” Additionally, the FCC’s rules now prohibit any allocation for
“basic” maintenance within a broader “technical support” service. Thus, as
a specific example, an on-site Help Desk, that supports both workstation and
network equipment, would be entirely ineligible, even if a cost allocation
was performed.
The FCC's language also states that technical support would be fully
ineligible “if it provides any ineligible features or functions” might be
used to deny funding for any service incorrectly including maintenance on
even a single piece of ineligible equipment." This new rule doesn't even
permit a cost-allocation to be performed or give any leeway for the 30%
rule. This is particularly disturbing knowing that many large maintenance
agreements cover more than 1000 different pieces of equipment and that often
the SLD and a vendor have differing opinions on whether a single piece of
equipment is eligible.
Some of the FCC's language is confusing, but we believe it is safe to assume
the following:
-- On-site full-time maintenance and technical support is no longer
eligible.
-- Help-desks functions are no longer eligible.
-- Any application or supporting contract submitted to the SLD should never
include the terms "help desk, technical support, or on-site."
To the extent these new rules impact existing contracts, the FCC states that
they will permit applicants 90 days after the new rules are published (which
should be in about 3 weeks) to renegotiate those contracts, or to provide
the Administrator with an itemized breakout of the components of the
contract, clearly identifying the portion of the contract price to be
allocated to basic maintenance. The FCC will permit parties to utilize cost
allocation for signed contracts in existence as of the effective date of
this Order. The burden is on the applicant to justify what portion of a
contract price should be allocated to basic maintenance services. The SLD
will be releasing details in the coming months on the best way for
applicants to submit this new information to the SLD.
***
LIMITS ON TRANSFER OF EQUIPMENT
The FCC has ruled that, beginning immediately, applicants may transfer
equipment to other eligible entities three years or more after the purchase
of the equipment. The transfer, however, may not be in consideration of
money or anything else of value. Transfers need not be limited to entities
with the same discount rate.
The only situation where the 3+ year doesn't apply is where the original
entity receiving the equipment is permanently or temporarily closed. In
those cases, the applicant may immediately transfer equipment to other
eligible entities; the receiving entity need not be of the same discount
level as the original recipient. In these situations, the transferring
entity must notify the SLD of the transfer, and both the transferring and
receiving entities must maintain detailed records documenting the transfer
and the reason for the transfer for a period of five years. In order to
enable the SLD to verify compliance with this transfer prohibition, the FCC
requires all recipients of internal connections support to maintain asset
and inventory records for a period of five years sufficient to verify the
actual location of such equipment.
The full text of the FCC's Order is located at:
www.sl.universalservice.org/data/pdf/fcc%2003-323.pdf
If you have any questions on these new rules, please contact me at
jtschell@comcast.net
Julie Tritt Schell
jtschell@comcast.net
(717) 730.7133 (voice)
(717) 730.9060 (fax)
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