FCC Publishes E-rate Modernization Report and Order

The FCC’s Modernization of the E-rate program will impact your E-rate discounts in many ways, both positive and negative.  

The Good:  Funds for in-house network equipment and maintenance will be available – perhaps for all applicants – over the next five years.

The Bad:  A number of services will become ineligible for funding (such as wireless data plans, email, webhosting).  Discounts on all voice services will be phased out over the next few years.

The Ugly:  Rules will change regarding discounts, application reviews, bids, what you can spend equipment and maintenance, and a number of other things – all to SIMPLIFY the E-rate process.

We’ll do our best to fill you in on what it all means.  Check out these topics – more to come:

  • FCC’s E-rate Modernization Order
  • The Big Change – Category 1 and Category 2
    • Category 1
    • Category 2
  • Notice of Proposed Rulemaking – the FCC wants YOU!
  • Eligible Services List for FY 2015
  • Cellular Service (Voice and Data),  Aircards, Mobile Hotspots

Questions?   If you have questions, please email them to us:

 

FCC’s E-rate Modernization Order

On 7/23/14, the FCC Commissioners published the Report and Order “Modernizing the E-rate Program for Schools and Libraries” (available from the FCC’s website)  The Report and Order not only details the many changes to the E-rate system, it also requests further questions and comments on several issues not yet agreed upon by the Commissioners.

Below is an outline of the changes to the E-rate program.  We will be studying the details and will be posting information on those details in the coming weeks.  We will focus initially on changes that will impact your fiscal and technology planning; after that we will focus on changes to the Form 470/471 cycle and then focus on changes to the post-funding commitment processes.

Although it contains significant changes, the outlined E-rate process still looks much like the current one:

  • Planning (but Tech Plans may be removed from the requirements)
  • Bidding and evaluation
  • Funding application
  • Post commitment actions

 The Big Change – Category 1 and Category 2:  The E-rate program will now change focus to support broadband access for all students and library patrons.  It is unlikely that any additional funds will be added to the $2.4 billion currently allocated to E-rate, so this broadband access support is being accomplished by reconfiguring the services supported by E-rate.  This reconfiguration will impact on your technical and fiscal planning.  The reconfiguration centers around restructuring of “Priority 1 and 2” services into “Category 1 and 2.”

 Category 1:

  1. The 5-year goal is to have Category 1 provide funding exclusively for broadband Internet Access and Wide Area Network (WAN) or Last-Mile service.
  2. Ineligible for FY 2015:  Some services will be declared Ineligible for E-rate funding starting with FY 2015:
    • web hosting
    • email
    • voice mail
    • directory assistance charges
    • text messaging
    • custom calling services
    • direct inward dialing (DID)
    • 900/976 call blocking
    • inside wire maintenance plans
    • distance learning/video conferencing services
    • paging
    • domain name registration services
  3. Starting in FY2015, Category 1 will be divided into Voice Services and Broadband Connectivity. 
  • Voice Services will be phased out over a maximum of 5 years via annual reduction of  E-rate discounts for these services.
    • Phase-out to be accomplished by discount reduction:  Your discount for these services will be lowered by 20% per year starting in FY 2015 (e.g.:  for a school with a discount percentage of 80%, FY 2015 will be reduced to a 60% discount, FY 2016 will be 40%, FY 2017 will be 20%, FY 2018 will be 0%.)
    • Voice Services includes the following services:
      • local phone service
      • long distance service
      • plain old telephone service (POTS)
      • interconnected VoIP service (but possibly not the broadband internet connection)
      • 800 service
      • satellite telephone
      • shared telephone service
      • Centrex
      • wireless telephone service such as cellular service
      • radio loop
  • Broadband Connectivity will include wide area network services and ISP costs. These services will continue to be funded in the same manner as they are at present.  The targets which define broadband are:
    • Internet Access: 
      • For schools, at least 100 Mbps per 1,000 students and staff users in the short term and 1 Gbps Internet access per 1,000 users in the longer term (5 years?).
      • For libraries, those that serve fewer than 50,000 people – at least 100 Mbps; libraries that serve 50,000 people or more – at least 1 Gbps.
    • WAN: 
      • For schools, a dedicated data service scalable to a long-term WAN target of 10 Gbps per 1,000 students.
      • For libraries, WAN targets have not been set at this time.

Category 2:

  1. Will consist of Internal Connections and Basic Maintenance; Managed WiFi will also be a new eligible service included in Category 2.
  2. Category 2 Funds:  The FCC will allocate $1 billion of Cat 2 funding each year for FYs 2015 and 2016.  If the process works well enough and additional funding can be located, $1 billion will be allocated to Cat 2 each year for FYs 2017, 2018, and 2019.  This second phase should provide Cat 2 funds for medium- and low-discount applicants – if it is done at all.
  3. Eligible products and services will focus on WiFi access including access points and the Local Area Networks (LANs) within each facility.  This will result in a significant trimming of the Eligible Service List.
  4. Five-year funding plan – FYs 2015, 2016, 2017, 2018, and 2019:
  • You will be allotted a specific amount to spend (Pre Discount) on eligible Category 2 products and services during that 5-year period:
    • Schools:  Total of $150/student for the 5-year period with a pre-discount floor of $9,200 per facility.
    • Libraries:  Total of $2.30/square foot for the 5-year period with a pre-discount floor of $9,200 per facility.
  • Schools presently eligible for 90% discount will be reduced to 85%; all other discount levels will be the same as they are now.

 

Notice of Proposed Rulemaking – the FCC wants YOU!

This is not the end of the Modernization process.  The FCC will also be seeking input from the public on several issues with the intent of issuing another Order.  The topics are:

  • Meeting Future Funding Needs
  • Ensuring That Multi-Year Contracts Are Efficient
  • Standardizing the Collection of NSLP Data
  • Encouraging Consortium Participation
  • Ensuring Support for Libraries is Sufficient

Information on filing comments are available in the Modernization Report and Order in paragraphs 301 through 311.  The deadline for filing comments is 9/15/14.

Eligible Services List for FY 2015:

On 8/5/14, the FCC Commissioners published the DRAFT of the ESL (Eligible Services List) with a six-page cover letter describing the list’s contents and requesting comments from the public (available from the FCC ’s website).  The ESL is radically different from prior years – for starters, the list itself is six pages vs. last year’s 49 page document.  And it is truly a list, or series of lists, with most of the supporting sections and descriptive verbiage stripped away.  So the good news is that the Modernized ESL is simpler, but this could be the bad news as well. 

Here’s what it contains:

  • A few paragraphs describing the new Category One and Two system.
  • For Category One (two pages):
    • A general description of what Category One contains.
    • A half-page list of “Eligible data transmission services and Internet access
    • A short list of “Eligible voice services
    • A half-page of descriptions of limitations on Fiber, Internet Access, and Wireless Services.
  • For Category Two (a bit more than two pages):
    • A general description of what Category Two contains.
    • A list of “Eligible Broadband Internal Connections Components
    • A paragraph describing the limitations on broadband internal connections.
    • A half-page description of “Eligible Managed Internal Broadband Services” and their limitations.
    • A short description of “Basic Maintenance of Eligible Broadband Internal Connections Components” and its limitations.
  • A page of descriptions of two Miscellaneous items:  “Fees” and “Installation, activation, and initial configuration”.

 That’s it – shorter by a lot, but is some vital information missing?

  • no list of ineligible services (“if it ain’t listed it’s ineligible“; USAC says that describing the complexities of ineligible services is too confusing so they won’t do it),
  • no description of related program requirements (but no explanation of where to find this information),
  • no extra information regarding components of complex services such as digital transmission service, distance learning, video, interactive television, and voice or video conferencing (seemingly because they are too complex for the ESL, but no alternative information source is mentioned),
  • no description of “Special Eligibility Conditions” (because they are already contained somewhere in the FCC;s rules, orders, etc.),
  • no glossary of the various services and terms.  This will be moved to the SLD website as a reference tool (good!) which is unfortunately described as “just for informal guidance” (not very encouraging).

Regretfully, it seems that little has been done to eliminate the complexity of the eligible services, and the FCC has opted to duck the issues as much as it has actually simplified them.  We will do our best to fill in the missing information, either on this section of our website or by personally answering your questions.  We will look into the details of the ESL as well as other aspects of the Modernization. 

Cellular Service (Voice and Data),  Aircards, Mobile Hotspots:

These services are of particular concern to us all:

  • Cellular voice is on the list of services to be phased out by reducing the discount 20% per year.
  • Text messaging is ineligible as of FY 2015.
  • Cellular data plans, air cards, and mobile hotspots are ineligible as of FY 2015 UNLESS they are:
    • Used on-campus (off-campus use, even if used for an educational purpose, is ineligible for support).  Nothing new – this has been the rule for a while now.
    • Cost effective versus a wireless local area network (WLAN) within the school.  Since this is rarely the case, expect a tough Cost Effectiveness Review if you request any of these services. 
    • If you do not have a WLAN, you may have to consider installing one versus using a wireless data plan.  CATCH 22: If your district/school/library does not have at least an 80% discount, you may not get funding for a new WLAN in FYs 2015 or 2016 – and then maybe not at all.

Bundled Plans:   If you have a wireless plan that bundles data or text messaging with voice, you must require your provider to cost allocate the ineligible data or text messaging costs.  If you cannot allocate out these ineligible costs, the entire plan will be declared ineligible and you will lose e-rate funding on the whole plan.

Existing multi-year plans

  • May be stripped of much of their funding as of FY 2015 by having data and text services removed from E-rate funding and having funding for the remaining voice services reduced year-by-year. 
  • Wireless data plans will not be Grandfathered – their funding will be denied as of FY 2015 unless they meet the on-campus and cost-effectiveness criteria.

You may need to review your cell, smartphone, and air card policies and schedule a conversation with your service provider soon NOW.