E-Rate Reform

Date: 09/23/2010

Summary

The FCC’s E-rate Order makes it easier for schools and libraries to get the highest speeds for the lowest prices by increasing their options for broadband providers and streamlining the application process. The Order is another advance in the Commission’s ongoing transformation of the Universal Service Fund, of which the E-rate program is part, to deploy broadband throughout America.

I. UPGRADING E-RATE FOR THE 21ST CENTURY

A) Improving Broadband Access for Students, Teachers, Librarians, and the Communities They Serve

1) FCC Expands Access to Low-Cost Fiber
The FCC decided to include dark fiber on the eligible services list (ESL) and allow eligible schools and libraries to receive support for the lease of fiber, whether lit or dark, as a priority one service, from any entity, including but not limited to telecommunications carriers and non-telecommunications carriers, such as research and education networks; regional, state, and local government entities or networks; non-profits and for-profit providers; and utility companies. The FCC amended its rules to allow any entity to provide supported telecommunications in whole or in part via fiber.

The FCC requires applicants that choose to lease dark (i.e., unlit) fiber to light it immediately and to use the lit fiber to meet their broadband needs in order to receive E-rate support. The decision will not allow applicants to use E-rate discounts to acquire unneeded capacity or warehouse dark fiber for future use.

The FCC amended its rules to clarify that states acting as service providers are treated the same as telecommunications carriers or other non-telecommunications providers when applicants are leasing a wide area network (WAN).

The FCC's decision supports installation and maintenance costs, however, at this time, the FCC declined to extend support to cover special construction charges that may be incurred to build out connections from applicants’ facilities to an off-premises fiber network, preferring to seek further comment in a subsequent proceeding on the potential effect of such changes on the fund.

The FCC also did not include as eligible the cost of modulating electronics needed to light dark fiber. The applicant is therefore responsible for covering these costs in order to receive E-rate funding for the lease of dark fiber.

2) FCC Allows Limited Community Use of Schools’ E-rate Funded Facilities and Services

The FCC revised its rules to permanently allow schools to open their facilities, when classes are not in session, to the general public to utilize services and facilities supported by E-rate. Applicants must certify that the services the applicant purchases at discounts will be used primarily for educational purposes. And E-rate recipients must ensure that students always get first priority in use of the schools’ resources.

To reduce the likelihood of waste, fraud, and abuse, and to guard against expanding the cost of the E-rate program:

• schools are not obligated to open their facilities to the general public to utilize services and facilities supported by E-rate during non-operating hours;
• schools participating in the E-rate program may not request funding for more services than are necessary for educational purposes to serve their current student population (a school desires to augment services beyond that which is necessary for educational purposes, it must use other, non-E-rate funded resources);
• any community use of the services purchased under the E-rate program must be incidental and not increase overall costs to the E-rate program;
• any community use of E-rate funded services at a school facility shall be limited to non-operating hours of the school and to community members who access the Internet while on a school’s campus;
• schools are urged to make community use policies and hours publicly available on their websites; and
• discounted service or network capacity may not be sold, resold, or transferred by such user in consideration for money or any other thing of value.

3) Access Expanded for Residential Schools that Serve Unique Populations

The FCC decided to allow residential schools that serve unique populations ­ schools on Tribal lands; schools designed to serve students with medical needs; schools designed to serve students with physical, cognitive or behavioral disabilities; schools where 35 percent or more of their students are eligible for the national school lunch program; or juvenile justice facilities ­ to receive E-rate funding for all supported services provided in the residential areas of those schools.

4) Annual Funding Cap Indexed to Inflation

The FCC decided to index the current $2.25 billion E-rate cap to inflation is a sensible approach to gradually aligning the support provided by E-rate with the needs of schools and libraries, which the E-rate program is designed to serve. For funding year 2010, then, the cap is raised to $2,270,250,000.

5) Limited Trial to Investigate Offsite Access: The E-rate Deployed Ubiquitously (EDU) 2011 Pilot Program

The FCC is establishing a trial program to investigate the merits and challenges of wireless off-premises connectivity services, and to help the Commission determine whether they should ultimately be eligible for E-rate support. The FCC plans to use this trial program to gather more information about implementation challenges and to identify and disseminate best practices in existing projects. The FCC hopes to learn about :

• operational and administrative issues associated with off-premises use and connectivity, as well as the financial impact on the E-rate program overall;
• what conditions, if any, should accompany off-premises access
• to prevent waste, fraud, and abuse;
• to ensure compliance with the statute and Commission rules, such as CIPA; and
• to enable such programs to maximize student achievement and utilization of library services
• how libraries are using remote access to serve their communities
• evolving uses of mobile wireless devices that will assist the Commission in crafting effective permanent rules in this area should it decide to support offsite wireless access

The FCC asks schools and libraries that already are implementing or experimenting with wireless off-campus learning to provide the Commission with information about their projects.

EDU Phase I
The FCC has set aside $10 million to fund off-campus wireless telecommunications and Internet access for some small number of select programs for funding year 2011. With little time for new projects to be planned, the FCC expects to fund primarily existing portable wireless programs and mainly ones that offer connectivity for limited purposes, like downloading digital textbooks.

B) Streamlining and Simplifying Administrative Requirements

The FCC moved to to streamline and simplify the E-rate programs. First, the FCC eliminated the E-rate technology plan requirements for all priority one applications while retaining the technology plan requirements for applicants requesting priority two funding (mainly for internal connections). Second, applicants are not required to have a technology plan in place before a third-party master contract’s FCC Form 470 is posted. Third, the FCC eliminated the requirement that applicants demonstrate they have a budget sufficient to acquire and support the non-discounted elements of the plan. Fourth, the FCC permits the disposal of E-rate equipment for payment or other consideration, but no sooner than five years after the equipment is installed.

C) Improving Safeguards Against Waste, Fraud and Abuse

The FCC codified the existing requirement that the E-rate competitive bidding process be fair and open.

This means that all potential bidders and service providers must have access to the same information and must be treated in the same manner throughout the procurement process.

It is a violation of the FCC’s competitive bidding rules if:

• the applicant has a relationship with a service provider that would unfairly influence the outcome of a competition or would furnish the service provider with “inside” information;
• someone other than the applicant or an authorized representative of the applicant prepares, signs, and submits the FCC Form 470 and certification;
• a service provider representative is listed as the FCC Form 470 contact person and that service provider is allowed to participate in the competitive bidding process; or
• a service provider prepares the applicant’s FCC Form 470 or participates in the bid evaluation or vendor selection process in any way.

II. ELIGIBLE SERVICES LIST

The FCC also released the eligible services list for 2011, adding dark fiber as mentioned above. The FCC also retained web hosting as an eligible priority one service, but declined to add 1) software applications that are used in connection with wireless devices; 2) enhanced firewalls and intrusion detection/intrusion prevention devices; 3)
anti-virus and anti-spam software; 4) online backup solutions; and 5) unbundled warranties.

Description

On May 20, 2010, the Federal Communications Commission took further steps toward ensuring universal access to affordable, high-quality broadband by proposing updates to the highly successful "E-rate" universal service program. The proposals further the FCC's National Broadband Plan goal of connecting schools and libraries to world-leading broadband by modernizing and improving the Universal Service Fund.

In the Notice of Proposed Rulemaking adopted today, the FCC explores ways the E-rate program can become a more effective educational tool for teachers, parents, and students. Broadband connectivity in the classroom and at home will enable educational advances, economic growth, government delivery of services, and civic engagement.

The Notice seeks comment on proposed reforms in E-rate that include:

• Cutting red tape by eliminating FCC rules that overlap with state and local contracting and technology planning requirements, while at the same time maintaining appropriate safeguards to mitigate potential waste, fraud, and abuse;
• Enhancing the FCC's ability to stop waste, fraud and abuse by codifying competitive bidding requirements;
• Reducing the administrative burden on applicants by conforming the E-rate definition of "rural" to the Department of Education's definition and simplifying the way schools calculate their discounts;
• Supporting online learning 24 hours a day, seven days a week, by allowing use of wireless Internet access service away from school premises;
• Providing schools and libraries with more flexibility to choose the most cost-effective bandwidth solutions by allowing the leasing of unused capacity from municipalities and other entities;
• Expanding access to broadband in residential schools that serve populations facing unique challenges, such as Tribal schools or schools for children with physical, cognitive, or behavioral disabilities;
• Offering more schools and libraries the opportunity to use the most technologically advanced applications -- including video streaming to the classroom and computer kiosks -- by creating a new, predictable funding mechanism for Internet connections;
• Indexing the current $2.25 billion cap on E-rate disbursements to inflation to maintain the purchasing power of the current program and enable continued support for high-speed broadband and internal connections in the future;
• Creating a process for schools and libraries to dispose of obsolete equipment without running afoul of the prohibition on reselling equipment and services purchased using E-rate funds.

Read the NPRM

The proposals could be implemented in funding year 2011, which begins on July 1, 2011.

Issues

I. STREAMLINING THE APPLICATION PROCESS
1. Technology Plans
2. Competitive Bidding Process
3. Application Process Streamlining
4. Discount Matrix Streamlining

II. PROVIDING GREATER FLEXIBILITY TO SELECT BROADBAND SERVICES
1. Wireless Services Outside of School
2. Expanded Access to Low-Cost Fiber
3. Expanding Access for Residential Schools that Serve Unique Populations
4. Targeting Supported Services for Broadband

III. EXPANDING THE REACH OF BROADBAND TO THE CLASSROOM
1. Predictable Internal Connections Funding for More Schools and Libraries
2. Indexing the Annual Funding Cap to Inflation

IV. CREATING A PROCESS FOR DISPOSAL OF OBSOLETE EQUIPMENT

Comment due date: 07/09/2010