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FY 2013 Priority 1 E-rate Demand Increases 10.8%
April 23, 2013

~ 99.6% of PA Districts Applied! ~
The SLD has released their FY 2013 funding analysis and while overall demand decreased by 4.8% to $4.986, the real news is that Priority 1 demand increased by double digits again, by 10.8% to $2.709 billion. In March, the FCC adjusted the annual E-rate cap for inflation and set the cap at $2.38 billion for FY 2013. This leaves a deficit of $320 million needed to cover just Priority 1 services, which shouldn't be an issue due to denials and cancellation of duplicate requests. 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 $2.709 billion, an increase of 10.8% from last year. While the increase isn't quite as steep as it was last year, we have come to the point in E-rate history where the entire E-rate fund is being consumed by demand for Priority 1 services. The FCC realizes this is a problem and is currently developing an E-rate modernization plan to be unveiled in the coming weeks in an NPRM (Notice of Proposed Rule Making) where applicants and service providers will have an opportunity to comment.
2) Priority 2 Demand: P2 demand (internal connections and basic maintenance of internal connections) is $2.277 billion, an overall decrease of 18.5% 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 -- $1.76 billion. Should USAC be able to fund the Priority 1 $320 million shortfall with denials and cancellations, 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 $350 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. This will leave a sizable deficit in Priority 2 funding at the 90% discount level and very much assures that no Priority 2 requests at 89% and below will be funded for FY 2013.
What happens if there isn't enough funding to cover all 90% requests? Under current E-rate rules, if there is not enough funding to cover an entire discount level, the funding will be distributed on a prorated basis (although the specifics of how that would be done are not spelled out). Using the current figures, this could mean that 90% P2 applicants could receive 57% of their funding requests or another calculation to be developed. We expect the FCC staff will spend the next few months work to solve this problem.
3) Nationwide Applications: A total of 45,189 Form 471s were received (1649 less than last year). 98.0% of applications were filed online and 80.5% of Form 471s were certified online as well.

4) Pennsylvania Applications: In PA, 5491 FRNs were filed (141 less than last year), by 1242 different entities (9 less than last year). In fact, only 2 public school districts did not apply, which represents participation rate of about 99.6% -- a new record! This is one of the highest participation rates in the nation and likely the highest among the largest states. Although 2 PA school districts did not apply, both of these districts indirectly receive 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 2012, Pennsylvania's non-participation rate was 1%, with 1.2 in 2011, 1.4% in 2010, 2% in 2009 and 5% in 2008.
5) Pennsylvania Demand: Pennsylvania applicants have requested $ 101,981,738.29, consisting of $66,988,838 in Priority 1 services (a decrease of $388,431), and $ 34,992,900 for priority 2 services/equipment. $28,871,685 was requested for P2 services/equipment at the 90% discount level.
6) PA Filing Timing: Daily tracking of PA Form 471 submissions indicated that approximately 150 (12%) PA applicants filed early (6 weeks ahead of the deadline) and nearly 59% of PA applicants waited until the last week to file.

7) Detailed Demand Estimates: The nationwide breakdown by service category, compared with FY 2012, is provided below. A more detailed breakdown of the SLD’s demand estimates for FY 2013 is available at: http://www.usac.org/_res/documents/sl/pdf/tools/news/FY2013-Demand-Estimate.pdf.
FY 2012 FY 2013
Telecommunications Services $1,741,927,741 $1,919,171,036.92
Internet Access $702,159,621 $790,280,426.56
Internal Connections $2,468,914,596 $1,996,053,653.99
Basic Maintenance $323,937,690 $280,485,259.27
Total Demand $5,236,939,649.95 $ 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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