Summary of 6th Report and Order E-rate Changes
Message Posted October 13, 2010
~ Important -- Please Read Entire Message ~
On September 28, 2010, the FCC Released the 6th Report and Order, bringing some of the biggest changes to the E-rate program since its inception in 1998. The full Order is available at: http://www.fcc.gov/Daily_Releases/Daily_Business/2010/db1001/FCC-10-175A1.pdf and is summarized below. There are still many unanswered questions, but this is the best information we have available at this time. Each of these items will be discussed in detail at the E-rate trainings being held in October and November. If you haven't already done so, please register and attend so you are fully informed of the changes: http://www.e-ratepa.org/training_outreach.htm.
Although the 6th Report and Order contains numerous changes, the FCC did not adopt all of the proposals contained in their May 2010 NPRM, such as revisions to the definition of Rural, changes to the discount calculation methodology, changes to the eligibility of non-broadband voice services, and changes to the manner in which P2 funding is distributed. We believe that a future Order may address these issues.
Topics Addressed in this Message:
· New Forms 470 and 471 for FY 2011
· Elimination of E-rate Technology Plan Requirement for P1 Services
· Strict Vendor Gift Rules Imposed
· Clarification of Competitive Bidding Violations
· New SPIN Change Restrictions
· Consultant Registration and Requirements
· Disposal of Obsolete E-rate-Funded Equipment
· Lit Fiber, Dark Fiber and Unbundled Warranties Eligibility Changes
· Community Use of E-rate Eligible Services at Schools
· Eligibility of Dormitory Locations at Residential Schools
· Off-Campus Wireless Pilot Program
· Increase the E-rate Funding Cap to Annual Inflation
1) New Forms 470 and 471 for FY 2011
The FCC has released new draft Forms 470 and 471 and is awaiting OMB approval prior to their final adoption and release. In general, many of the useless questions and sections have been eliminated. These forms will be reviewed in detail at the E-rate trainings. For a sneak peak at the new draft Form 470, go to: http://fjallfoss.fcc.gov/edocs_public/attachmatch/DA-10-1248A2.pdf. To view the new draft Form 471, go to: http://fjallfoss.fcc.gov/edocs_public/attachmatch/DA-10-1248A4.doc.
Timing of new forms: The E-rate window will open when the new Form 471 becomes available, expected to be mid-December; the old Form 471 will not be accepted for FY 2011. Until the new Form 470 is approved, applicants should use the currently available form. But on the day the new Form 470 is available, there will be a flash cut whereby no old Form 470s will be accepted after that date (except those that have previously been filed and certified). Applicants are strongly encouraged to file their Form 470's now and not wait until the new Form 470 is released.
2) Elimination of E-rate Technology Plan Requirement for P1 Services
Beginning with FY 2011, the E-rate requirement to have an approved technology plan for applicants requesting only Priority 1 services has been eliminated. The E-rate requirement remains for applicants requesting Priority 2 services and equipment (internal connections and basic maintenance of internal connections). In addition, the technology plan requirement for the federal Title II Part D (EETT) grant funding and the PA eFund Grant funding remains. Therefore any PA applicant receiving funding through these grant programs -- either directly or indirectly through a consortium application -- must have an approved technology plan spanning the year(s) of the grant implementation.
This means that the following schools much have an approved tech plan that spans July 2011 - June 2010:
-- School districts and charter schools that are receiving 2009/10 and 2010/2011 EETT grant funding and non-public and private schools receiving goods and services through the 09/11 EETT program must have educational technology plans through June 30, 2012 or later (program implementation spans 11/12 due to the late funding distribution).
-- LEAs and/or schools that will be receiving 2010/11 eFund monies (or services and/or goods through a consortium application) must have educational technology plans through June 30, 2012.
-- LEAs and/or schools that are receiving 2009/10 eFund monies (or services and/or goods through a consortium application) must have educational technology plans through June 30, 2011.
Please note: Local education agencies (IU, school districts, charter schools, and AVTS/CTC) must use the web-based eStrategic Planner to create and submit their educational technology plan reports for PDE review and approval. PDE does not review or approve educational technology plans for on-public and private schools or public libraries. If a non-public or private school is not participating in E-Rate and does not have a "USAC-certified Approver" approved educational technology plan, the non-public or private school may receive 'plan approval' through its resident district or IU for EETT and eFund purposes.
In addition to removing the E-rate technology plan requirement for P1 services, the FCC also removed the budget requirement as part of the five required tech plan elements.
3) Strict Vendor Gift Rules Imposed
The FCC has declared that receipt of gifts by applicants from service providers and potential service providers is a competitive bidding violation and applicants and vendors will now be bound by the Federal Government regulations or state/local rules (whichever are stronger). Only items worth $20 or less (meals, pencils, pens, hats, t-shirts, prizes, drinks, backpacks, etc.) as long as those items do not exceed $50 per E-rate funding year per school or library employee from any single service provider are permitted. This includes gifts and meals from any service provider employee, officer, representative, consultant, agent, independent contractor, reseller, or directors of the service provider. These gift restrictions are applicable throughout the funding year, not just during the competitive bidding process. Charitable contributions to schools or libraries that are entirely unrelated to technology procurement are permitted (such as sponsorships of literacy programs and scholarships, or the football program advertisement section.)
Although these restrictions are imposed on vendors, school and library personnel are also directly impacted as they may not accept any item, meal, gift, etc. worth more than $20 (up to an aggregate amount of $50) per E-rate funding year from any single service provider agent. This includes those individuals involved in the technology and business offices, but also school and library boards of directors, E-rate consultants, and any individual that has any role in the technology planning process.
These new rules, along with detailed examples, will be discussed at the E-rate trainings being held in October and November.
4) Clarification of Competitive Bidding Violations
The FCC has provided additional clarifications about what competitive bidding behaviors are prohibited as follows (this is not an exhaustive list):
Applicant cannot have a relationship with the service provider that unfairly influences the outcome of the competition or provides the service provider with “inside” information.
Someone other than the applicant (or its consultant) cannot prepare, sign or submit the Form 470.
Service provider cannot be listed as the contact on the Form 470 and the provider is allowed to bid.
Service provider cannot prepare the applicant's Form 470 or participate in the bid evaluation or vendor selection process in any way.
Applicant cannot turn over the competitive bidding process to a service provider.
An applicant employee with a role in the selection process cannot have an ownership interest in a vendor seeking to provide the services.
The applicant must describe the desired products and services with sufficient specificity to enable interested parties to bid.
It should be noted that the FCC did not include in this list the proposal to prohibit applicant employees or board members from serving on any board of any type of telecommunications, Internet access, or internal connections service provider that participates in the E-rate program. This proposal was strongly opposed by the IU and ESA community.
5) New SPIN Change Restrictions
In recent years, some service providers have been skipping the Form 470 bidding process and then enticing the school or library to switch vendors after the Form 471 filing window has closed or sometime throughout the funding year because the SPIN change rules were very lax. Because of this abuse, there are strict new rules pertaining to what types of SPIN changes will be permitted.
Operational SPIN changes now must have a legitimate reason to change, such as breach of contract, or provider unable to perform, or vendor bankruptcy. Lower price is no longer an allowable reason to switch vendors. In switching providers, applicants must select the service provider with the next highest point value when the bid evaluation was conducted. The Order is silent on what happens if no other bids were received, and we are seeking additional clarification on this issue. The Order also is silent on whether Split FRN SPIN changes will continue to be permitted which are most commonly used when a service delivery is delayed beyond July 1 and the applicant seeks to recoup E-rate funding for the funds expended with the existing provider for the time period between the start of the funding year and service cut-over. Corrective SPIN changes will continue to be permitted which mostly include data entry errors.
6) Consultant Registration and Requirements
The new Form 471 contains a section where applicants must identify any consultant that assisted the applicant with the application process (if applicable). Each consulting firm will be assigned a CRN (Consultant Registration Number) that must be placed on the form and if the firm has multiple employees, the individual employee who assisted with the form also must be identified. It is expected that this information will be publicly visible on submitted forms.
7) Disposal of Obsolete E-rate-Funded Equipment
Previous FCC rules did not permit the disposal or resale of E-rate-funded equipment -- period -- which had put P2 funding recipients in a bind when it came to the question over what they should do with equipment that was funded many years ago. The new rules assume that equipment has a de minimus value after five years and as such, allow for the disposal or resale of the E-rate funded equipment, but no sooner than five years after installation date. Applicants may receive payment in return for the disposal and are not required to pay back those funds to USAC. After five years, if the equipment is disposed, the applicant is not required to notify USAC but asset registers should be updated to reflect the equipment disposal.
These new rules do not change the existing requirement that equipment must be used in the building in which it was approved and for the purpose that it was originally approved. After three years, the equipment may be transferred to another location within the school or library, but it may not be disposed of or sold until at least five years after it was installed. The only exception to this is if the school building is closed in which case the equipment may be moved to another location within the school or library and USAC must be notified of the transfer. The USAC notification requirement also is still in effect for equipment that is transferred to another school or library building after three years from the date of purchase, but before five years from the date of installation.
8) Lit Fiber, Dark Fiber and Unbundled Warranties Eligibility Changes
a) Lit Fiber: Applicants will now be able to lease lit fiber from any provider, including non telecommunications providers (such as cable companies, electric companies, state or regional networks, etc.) in addition to telecommunications common carriers. This also means that any service may transverse the fiber, including voice, video, data and Internet (previously only eligible telecom providers could provide voice, video and data over telecommunications lines). This is great news to PA applicants that previously have not sought E-rate discounts for their lease of fiber from a non-telco. In order to qualify for E-rate discounts on lit fiber lines moving forward, the service should be listed in both the telecom and Internet categories on the Form 470. Existing contracts for lit fiber service from a non-teleco should be rebid if the contract was signed previously without posting a Form 470 and waiting 28 days.
b) Dark Fiber: The lease of dark fiber is now eligible and may be provided by either a telecom or non telecom provider. The applicant must provide the modulating electronics and the fiber must be lit immediately (cannot lease excess capacity for future growth). Installation costs are eligible, but only from the school building to the edge of the school property line. Special construction costs or installation costs (costs beyond the school property line) are not eligible. The cost of the modulating electronics is not eligible for P1 discounts. The FCC would like applicants to competitively bid both lit and dark fiber and do an apples-to-apples comparison of the total costs involved before deciding which service to select.
c) Unbundled Warranties: No longer eligible. Manufacturer warranties (up to 3 years) that are bundled with the standard purchase price of eligible equipment, will continue to be eligible. However, E-rate will pay for no longer approve separately-priced warranties (such as Smartnet) or any type of fixed price maintenance contracts that are insurance-like contracts. In order to receive E-rate funding for maintenance, applicants will be required to request E-rate funding for an estimated number of maintenance hours per year for their eligible equipment, based on current life of equipment and history of needed repairs. But the actual reimbursement from USAC will only pay for the cost of the actual work performed (which includes labor, equipment fix, or if it is beyond repair, equipment replacement.) There are still many unanswered questions about the new basic maintenance restrictions.
9) Community Use of E-rate Eligible Services at Schools
The FCC made permanent the rule that allows schools that receive E-rate funding to permit the general public to use the schools’ Internet access during non-operating hours. Until February 2010, such Internet access was only permitted to be used by K-12 students and staff for educational purposes only, putting many schools and most vocational technical schools in a difficult position. In February 2010, the FCC permitted such usage on a temporary basis. There are three conditions for community use of school facilities:
--- i. Usage is permitted only during a school’s “non-operating” hours, meaning after a school’s normal closing hour, on weekends and school holidays, and during summer months when the school is not in session. Importantly, a school is not required to open its facilities for community use, and schools that do allow community use may establish their own policies for such use. Internet filtering rules must remain intact during such use, however.
--- ii. A school may not request E-rate funding for a higher level of service than would be required for educational purposes. In other words, schools may not inflate their E-rate request in anticipation of additional bandwidth needs for community use.
--- iii. Schools may not charge for the use of the Internet access, but may charge reasonable fees to cover overhead costs from individuals that use the schools' services and facilities. Additionally, organizations using a schools' services during non-operating hours are permitted to recover related costs (e.g., “curriculum development and presentation costs”) from participants.
Note: This FCC decision in no way permits schools to share their bandwidth with other ineligible entities, such as an off-site after-school program at the YMCA or community center. Further, it does not permit partially eligible entities, such as a Diocesan office that provides services to both schools and the church, to stop cost allocating the ineligible portion of Internet use.
10) Eligibility of Dormitory Locations at Residential Schools
Beginning with FY 2011, E-rate eligible services may be provided to dormitory locations at residential schools that service students facing unique challenges. Eligible populations include schools serving 1) tribal students 2) children with physical, cognitive, or behavioral disabilities 3) juvenile justice students, or 4) residential schools where 35% or more of their students are eligible for NSLP. Schools can be public or private and both Priority 1 and Priority 2 services are eligible. Residential locations of cyber school students or employees are not eligible.
11) Off-Campus Wireless Pilot Program
The Order announced the creation of a new, limited, competitive, pilot program that will provide funding for off-campus wireless connectivity through mobile devices. The pilot allows $10M in FY2011 to support innovative and interactive off-premise wireless device connectivity for schools and libraries, with preference given to those already implementing such programs. The FCC will use the pilot to gather more information about issues affecting such use which can later be used for permanent rules. The program will be administered by the FCC and will require a separate application. No additional details are available at this time.
12) Increase the E-rate Funding Cap to Annual Inflation
Since the program's inception, E-rate funding has been capped at $2.25 billion. Starting with FY 2010, the cap will increase for inflation, based on the Department of Commerce's Gross Domestic Product numbers, bringing the FY 2010 cap to $2,270,250,000. The cap will not decrease in event of deflation and will be in addition to any rollover funds from previous years' undisbursed funding.
If you haven't done so already, please register for one of the beginners or veterans trainings to learn more about these changes and to ask questions! Registration information available at: http://www.e-ratepa.org/training_outreach.htm.
-Julie
717-730-7133 - o
717-730-9060 - f
jtschell@comcast.net
www.e-ratepa.org
Penn*link
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