Clarification on Unbundled Warranties
Message Posted January 31, 2010
When the FY 2010 Eligible Services List was adopted in early December 2009, the FCC concluded that "unbundled warranties" of priority 2 equipment were not E-rate eligible. This surprise announcement left many unanswered questions because there was no actual definition of unbundled warranties listed in the ESL.
Last Friday, the SLD issued clarifying guidance from the FCC which basically states that warranties that include "duplicative" warranty or part replacement services are not eligible. The following is the exact language released by the SLD:
Unbundled Warranties Update
On December 2, 2009, the FCC released a Report and Order which made findings about the particular changes to the Eligible Services List (ESL) recommended by USAC (FCC 09-105). Among other things, the FCC decided that unbundled warranties should not be added to the ESL. We know that this finding has caused concern for those applicants that have received E-rate discounts on Cisco's SMARTnet technical support service and other similar contracts (for the purposes of this news brief, we will call these types of agreements "SMARTnet-type contracts") in the past and those applicants that have planned to seek discounts for these contracts for Funding Year 2010. After consulting with the Federal Communication Commission's Wireline Competition Bureau (FCC), we are able to provide additional guidance on this matter.
The Commission's definition of basic maintenance states that "basic maintenance services shall be eligible as an internal connections service if, but for the maintenance at issue, the internal connection would not function and serve its intended purpose with the degree of reliability ordinarily provided in the marketplace to entities receiving such services. Basic maintenance services do not include services that maintain equipment that is not supported or that enhance the utility of equipment beyond the transport of information, or diagnostic services in excess of those necessary to maintain the equipment's ability to transport information." 47CFR 54.506(b)
Like other types of service contracts, SMARTnet-type contracts can qualify for E-rate funding under the basic maintenance definition, even after the most recent Commission order. However, if an applicant seeks discounts for a SMARTnet-type contract along with other technical support contracts, as potentially SMARTnet-type contract might not cover all of an applicant's basic maintenance requirements, there should be no overlap between the contracts. For example, if the SMARTnet-type contract provides for the repair of equipment, the applicant's other technical support contract(s) should not also provide repair service for the same equipment covered by the SMARTnet-type contract. In other words, duplicative contracts for basic maintenance will not be funded by E-rate.
-- Julie
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