E-rate 2.0
OVERVIEW OF CHANGES
Overview
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Framework for Reform
Connectivity Goals
Discount Calculation Changes
Priority 1 Changes
Priority 2 Changes
Invoice Changes
Program Streamlining Measures
Cost Effectiveness Efforts
Increased Accountability
Tribal outreach
Further Notice of Proposed Rulemaking
History
 In July 2013, FCC released Notice of Proposed Rule
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Making (NPRM) seeking comments on various proposed
reforms
In December 2013, Tom Wheeler became FCC Chairman,
vowing to modernize E-rate
I March 2014, FCC issued Public Notice seeking more
focused comments on proposed E-rate reforms
On July 11, 2014 FCC voted 3-2 to adopt proposed
reforms
On July 23, 2014, 162+ page Order was released,
providing details on E-rate program changes
50,000 Foot View
 Focus E-rate on funding broadband connectivity to buildings and
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inside buildings
Accomplish program overhaul without increasing the funding cap
Limited funds means there are hard choices
Phase out voice services and end funding of other legacy services
beginning FY 2015
Ambitious broadband connectivity goals
Establish P2 budgets per student (minimum amount per building) to
allow all applicants to receive funding for equipment inside buildings
P2 funding limited to broadband infrastructure and equipment, no
more voice or video equipment eligibility
Streamline program requirements to issue funding approval letters
more timely
Share data about pricing and connectivity levels to promote better
pricing
Short Term Pain for Long Term Gain
The Pain:
 In FY 2015 certain Priority 1 services not deemed essential for
broadband connectivity will no longer be eligible
 Phase down of voice telecommunication services funding begins in
FY 2015, 20 discount percentage points per year
 Very narrow Wireless data plans eligibility
The Gain:
 All schools will have access to P2
 Dedicated $1 Billion annual fund for Wi-Fi equipment
 Apply based on budgets amounts of $150 per student/$9200 per
building minimum so no applicant receives disproportionate
funding
 FCC projects it will cost $5 Billion over 5 years to fund all
applicant’s Wi-Fi equipment projects
 Streamlining procedures to ease application process
Connectivity Goals
 Internet
 WAN Connections
 Internal Connections
Internet Connectivity Goals
Schools
 Internet access of at least 100 Mbps per 1,000
students and staff (users) in the short term
 1 Gbps Internet access per 1,000 users in the long
term
 Measurement will be at the district level for school
districts and school level for schools that are not part
of a district
WAN Broadband Connectivity Goals
 Schools
 Dedicated data service scalable to 10 Gbps per 1,000
students in the long term
 FCC assumes that in most cases, a 1 Gbps fiber
connection can be readily scaled to 10 Gbps with
upgraded networking
Internal Connections Goals
 No goals set at this time because more information is
needed
 FCC staff will conduct a survey of schools and
libraries to determine the sufficiency of their
LAN/WAN capacity and coverage
 Specific goals will be developed at a later time
Discount Calculation Changes
 District Wide Discount Calculations
 Library Discount Calculations
 Rural/Urban Calculations
 Income Surveys
 Community Eligibility Provisions of NSLP
District-Wide Discount Calculations
 All discounts will be calculated on a district-wide simple average basis
 Total district NSLP eligible students/total district enrollment
 Example
School
Rural/Urb
an
Enrollment
NSLP eligibility
Plainfield Elementary
Jacksonville Middle
School
U
210
120
U
195
95
Newville High School
U
201
115
Total
U
606
330
330/606=54.4%
NSLP eligibility
District-Wide
Discount=80%
Library Discount Calculation
 Library systems that have branches or outlets in
more that one public school district will use the
address of the central outlet or main administrative
office to determine which public school district the
system is in
 Use school district’s discount application to central
outlet or main office when applying as a library
system or on behalf of individual libraries within that
system
New Urban/Rural Definition
 Current rural/urban county classifications no longer in use for FY2015
 2010 U.S. Census will be used instead
 Urban applicants are those with addresses in an ”urbanized area” or “urban
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cluster”
Urbanized area has 50,000 or more people in a densely settled core of
census tracts
Urban clusters are adjacent to an urbanized area and has at least 2,500
people
All areas that are not considered “urban” are classified as rural
Rural/Urban status of majority of buildings (physical addresses) will be
used for entire district
Question asked of FCC: What if a district has two buildings, and one has a
rural address and the other has an urban address?
Full list of urban areas at
http://www2.census.gov/geo/ua/ua_st_list_all.xls. If your town is NOT on
this list, then it is considered rural. (subject to verification with FCC)
Surveys
 Income survey results can no longer be extrapolated
 Discounts will only be based on the income surveys
actually collected
Community Eligibility Provision
 CEP program provides a new alternative to NSLP household applications for free
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and reduced price meals in high poverty LEA’s
No longer required to obtain individual income eligibility applications from each
student
NSLP estimates are derived from existing data from other income-based programs
A school, group of schools, or the entire district must have an identified Student
Percentage of 40% or more and must offer both breakfast and lunch daily to qualify
for CEP
For E-rate, CEP schools will use the 1.6 multiplier as is currently permitted by
USDA and other federal programs
Presumably, the NSLP eligibility data that will be entered into the Form 471. Block 4
discount calculation worksheet will already contain the 1.6 multiplier
CEP schools must retain back-up calculations which may be requested during PIA
and audits
The previous FCC guidance that CEP schools must use the NSLP data from the year
before they opted into CEP has been repealed
Priority 1 Changes
 Name Change
 New ineligible Services
 Phase out of Voice Services
 Wireless Data Plans
 Bidding Exemption for Certain Bundled Internet
Service
 Bundled End-User Equipment
Priority One Overview
 Traditional Priority 1 will be called Category 1
 Category 1 will be fund broadband connectivity and
Internet access to buildings
 Category 1 services will be funded first before
Category 2 equipment and services are funded in
order to ensure there is enough funding available to
cover all Category 1 funding requests
Priority 1 Service Eligibility Changes
 Beginning in FY2015, paging, webhosting, certain
telephone service components and e-mail will no longer
be eligible
 Beginning in FY2015, all voice services will begin to be
phased out by 20 discount percentage points/year
-This includes cellular voice, local and long distance,
PRI service, and hosted VOIP service
-No voice services will be eligible beginning with
FY2019
 Cellular data and mobile cellular broadband services
subject to strict cost effective scrutiny
Voice Phase Out Schedule
If Your
District
Discount is:
FY 2015
FY 2016
FY 2017
FY2018
FY2019
No Funding
No Funding
No Funding
No Funding
No Funding
No Funding
No Funding
No Funding
No Funding
No Funding
No Funding
No Funding
No Funding
No Funding
No Funding
No Funding
No Funding
No Funding
No Funding
No Funding
No Funding
No Funding
20%
No Funding
25%
5%
40%
20%
50%
30%
10%
60%
40%
20%
70%
50%
30%
10%
80%
60%
40%
20%
90%
70%
50%
30%
10%
No Funding
Wireless Data Plans
 Cellular data plans and mobile broadband services (such as
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wireless services to an iPad or aircards) are no longer eligible
in buildings that have Wi-Fi access
In buildings without Wi-Fi: These services are only eligible
upon showing that the individual data plans are the most cost
effective option for providing internal broadband access for
portable mobile devices
Must prove either that installing a WLAN is not physically
possible, or provide a comparison of the costs of individual
data plans vs. installing a WLAN solution
Be prepared for extensive cost effectiveness review from PIA
Library bookmobiles are an exception to heightened review
Voice Telephone Service Components
Ineligible as of FY2015
Directory assistance charges
Text messaging
Custom calling services
Direct inward dialing (DID’s)
900/976 call blocking
Inside wire maintenance plans
All such charges must be deducted from both the pre-discount
cost included on the Form 471 and all associated vendor or
applicant reimbursement invoices (SPIs and BEARs) for 2015
invoices
 Such charges do NOT have to be deducted for FY2013 or
FY2014 BEARs of SPIs
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Bidding Exemption for Bundled Internet
 “Commercially available” Broadband/Internet packages
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that cost less than $300 per month per building (prediscount) are now exempt from the Form470 competitive
bidding requirements for FY2015
Minimum speed must be 100 Mbps downstream and 10
Mbps upstream
Cost must be based per building and cannot be averages
across multiple buildings
Annual cost of $3600 must include all equipment and
installation charges and monthly recurring charges
Applicants must still submit a Form 471 application for
funding each year
Priority 1 Bundled Equipment Limitations
 Beginning in FY2015, equipment is not permitted to
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be bundled at no cost with an eligible service
This includes free cellular phones, iPads/tablets, and
VOIP equipment
Applicants will be required to perform a cost
allocation to remove the value of the ineligible
equipment form the pre-discount price claimed for
the annual service costs
Previously signed contracts are not grandfathered
This rule resulted from an FCC Order in May 2014
and is not technically in the July Reform Order
Priority 2 Changes
 Name Change
 National Funding Amounts
 Discount Matrix Change
 Budgets for Funding Requests
 Service/Equipment Eligibility Changes
 April 1 Installations
 Preferred Master Contracts
 Technology Plans
Priority 2 Overview
 Traditional Priority 2 will be called Category 2
 Category 2 will fund Wi-Fi and related infrastructure and
equipment
 Category 1 services will be funded first in order to ensure
there is enough funding available to cover all Category 1
funding requests
 Category 2 annual budget target is $1 Billion each year
(at minimum)
 Should not enough funding be available to cover an
entire discount band, pro-ration will be applied using the
NSLP percentage (100% NSLP funded first, then
99%,98%,etc)
Priority 2 Discount Matrix Changes
 Maximum Category 2 discount will change from 90% to
85%
 All other discount bands will remain the same
NSLP
Eligibility
Urban
Rural
Less than 1%
20%
25%
1 – 19 %
40%
50%
20 – 34%
50%
60%
35 – 49%
60%
70%
50 – 74%
80%
80%
75 – 100%
85%
85%
Priority 2 Predictability
 Not all applicants will be funded in the year in which
they apply
 There is no provision to allow applicants to spend
funds and be reimbursed in a later year
 Intent of FCC to connect 10 million students each
year in FY2015-FY2019
 FCC Chairman: “All schools and libraries will have
access to P2 funding once every 5 years.”
Category 2 Funding Budgets
 Each school building will be permitted to apply for a
pre-discount cap of $150 per student, or a minimum
building cap of $9200, over a rolling five-year basis
 Money is allocated per building (not on a districtwide basis), and applicants cannot move funding
from one school to another
 Funding may be requested over 5 years, or applied
for in a single year
-Annual application is required and funding
approval is subject to available funds each year
Category 2 Funding Budgets (Cont’d)
 If an applicant requests less than the maximum
budget available for a building in a single year, the
applicant may request the remaining balance in
subsequent years of the five-year cycle
 No look-back provision for applicants funded in
years prior to FY2015
 All competitive bidding requirements will continue
to apply and applicants can only apply for what they
need
-Possible Preferred Master Contract bidding
exemption
Priority 2 Eligibility Changes
 Beginning in FY2015, Priority 2 eligible services will
become focused solely on Wi-Fi and building
infrastructure and networking
 Certain equipment and services will be permanently
eligible
 Other equipment and services will be eligible for FY2015
and 2016 and may sunset unless FCC extends eligibility
for FY2017 and beyond
 Other equipment currently eligible will no longer be
eligible
-Voice components
-Video components
-Most servers
Category 2 Permanently Eligible Items
Routers
Switches
Wireless Access Points
Internal Cabling
Racks
Wireless Controller Systems
Firewall Services
UPS Equipment
Software to Support Eligible Equipment
Cloud Based Functionality of this Equipment
Category 2 Eligibility in FY2015 and 2016
 Caching functionality – necessary software or equipment such as
caching servers (brand new)
 Managed Internal Broadband Services (MIBS)(including managed WiFi) which cover the operation, management, or monitoring of a LAN or
WLAN
-Obtain LAN’s/WLANs as a service typically for a period of three to five years from third
party that manages, operations and maintains network; or,
-Own the equipment, but have a third party manage it for applicant
 Basic Maintenance Services for eligible equipment
-But for the maintenance at issue, the internal connection would not function
and serve its purpose with the degree of reliability ordinarily provided in the
marketplace to entities receiving such services
 Applicants are allowed to apply for up to $30 per year per student for
these services and agree to a 5 year budget
 Unless FCC extends eligibility, these items will sunset eligibility at the
end of FY2016
-Exception to Sunset: Applicants that received funding approval in FY2015 and/or
FY2016
for these items may continue to obtain funding for FY2017-FY2019
Category 2 – Non-Instructional Facilities
 Non-Instructional Facilities are not eligible for
equipment unless the NIF has classrooms or the NIF
houses the WAN/WLAN central equipment
 such as the network operations center)
 For NOCs, applicants must allocate a portion of each
school’s $150 budget toward the purchase of such
equipment
Category 2 – New Schools
 New schools may estimate the number of students
who will be attending the new school and seek
funding based on that estimate
 However, if an applicant overestimates the number
who enroll in that school, it must return to USAC by
the end of the next funding year any excess funding
based on the actual number of enrolled students
Category 2 – Students in Multiple Schools
 Students who attend multiple schools, such as those
that attend Cooperative Districts of CTCs part-time,
may be counted by both schools in order to ensure
appropriate LAN/WLAN deployment for both
buildings
Category 2 – Early Installation
 Eligible equipment may be purchased and/or
installed on or after April 1 prior to the beginning of
the funding year
 This provides maximum amount of time during the
summer to complete the necessary work
 Disbursements will not be made until on or after
July 1
 General rule still applies that applicants cannot
apply for retroactive funding for equipment
purchased and installed in years prior to the funding
year
Preferred Master Contracts
 FCC staff is empowered to designate certain equipment
contracts that offer excellent nationwide pricing as
“Preferred Master Contracts”
 May allow such contracts to be exempted from the Form
470 competitive bidding requirement and/or
-Require applicants to include the PMC pricing in
their bid evaluations even if the PMC is not submitted
as a bid response to the applicant’s From 470
-PMC designations must be reevaluated every two
years
 PMC process is being established by the FCC staff
 No PMCs have been designated yet
Technology Plan Requirement Changes
 Beginning in FY2015, the technology plan
requirement will be repealed
 This means there is no federal technology plan
requirement for Priority 1 or Priority 2 funding
Invoicing Changes
 Direct Invoicing of Applicants for BEARS in FY 2016
 Stringent Invoice Deadline Extension Procedures
Invoicing Deadlines
 One automatic 120 day invoice deadline extension will be granted if
the request is made on or before the original invoice deadline
(which is typically October 28 following the funding year)
-Invoice deadline extension requests submitted after the invoice
deadline will not be granted by USAC
-Requests for extensions submitted after invoice deadline and
must be requested via a waiver request to the FCC
-FCC will no longer be generous with granting such requests and
applicants will need to show truly extraordinary circumstances to
justify a waiver
 New Rules take effect for all pending un-invoiced FRNs regardless
of Funding Year
 Purpose of New Procedure: Unused funds will be able to be deobligated more quickly to be used to make other funding
commitments
Direct Invoicing
 Beginning in FY2016, applicants can submit BEARs
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directly to USAC without requiring service provider
approval
USAC will send funds directly to applicants using
electronic funds transfer
Applicants will need to provide bank account
information to USAC in order to set up electronic funds
transfer arrangements
Payments will be made only to school and libraries and
not to consultants
Unsure whether direct payments to applicants is an
option or a requirement
Streamlining Measures
 Multi-Year Contract Streamlines PIA Review
 Electronic Forms Filing
 September 1 deadline for FCDLs for fundable
applications
Multi-Year Contract Application Streamlining
 Multi-Year contracts with a term of five or less years will
have a streamlines review after first year of PIA review
 FRN must be for the same services but may include
changes to services that are permitted under the
establishing Form 470 and contract
 Applicants will provide basic information identifying the
applicant and FRN, and identify and explain any changes
to the discount rate, the membership of a consortium or
the services ordered
 Applicants must still apply each year and funding
commitments will be made year-by-year
USAC Efficiencies
 USAC will try to issue all FCDLs for workable FRNs by
September 1st of each funding year
-Workable FRN means that all information has been submitted,
and there is no investigation or audit of the applicant, service
provider or
consultant associated with the FRN
 IT systems overhaul will be done as a long-term project
-Includes online portal with pre-populated information for
forms completion
-Electronic access to non-confidential information
including both forms information and supporting
documentation submitted th USAC in a format that can
be used with application programming interfaces (APIs)
 Plain language communications in a simple, direct, and userfriendly manner
Electronic Filing Requirement for Forms
 All forms submitted to USAC and all notifications sent by
USAC will be required to be filed electronically as of
Funding Year 2017
 Some but not all forms may be required to be
electronically submitted in 2015 and 2106
 USAC is undertaking an IT Modernization Process to
upgrade and enhance online experience
-471 changes for FY2015
-Integration of Item 21 into From 471 for 2015
-Major overhaul for Fy2016/17 including Applicant
Portal
-Support for multiple web browsers, etc.
Appeals
 All appeals, except for requests of waiver of FCC
rules, must first be filed with USAC
 Requests for rule waivers should continue to be filed
directly with the FCC because USAC does not have
authority to waive FCC rules
 Considered a streamlining measure because there
will be fewer appeals submitted to the FCC and
shorter wait time to receive appeal decision
-USAC metric is to process 90% of appeals within
90 days
Cost Effectiveness Efforts
 Data Collection
 Price Transparency
Data Collection
 Form 471 will be modified to require applicants to report
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information to measure progress towards meeting
connectivity goals
The Order in not specific but it appears that WAN circuit
information will be required per building and possibly per
circuit
All data collected will be made publicly available
FCC also will work with schools and libraries to develop
network measurement methods to gather data on network
usage and performance
FCC and USAC will develop best practices and benchmarks
regarding network utilization, network architectures, network
performance, network optimization and management,
Pricing Transparency
 Item 21 information will be standardized to provide
meaningful information that is easy to compare across
applicants and will be made public in electronic format in
bulk data files and/or through publicly available
application processing interfaces
 Such information will be considered non-confidential
unless an applicant can certify that the disclosure of price
information violates a statute, regulation or court order
 New contracts cannot contain self imposed prohibition
on price disclosure unless required by state law or court
order
Lowest Corresponding Price
 LCP is the price charged to non-residential customers who are
similarly situated to a particular school, library, rural health
care provider or consortium that purchase directly from the
service provider
 In order to ensure prices paid for E-rate services and
equipment are as low a possible, service providers are
required to offer in their bids LCP and to charge applicants
the LCP for such services and equipment
 Applicants are encouraged to verify that the service provider’s
bid complies with the LCP requirement and services providers
are obligated to ensure that the price charged applicants
complies with LCP
 FCC’s Enforcement Bureau intends to increase LCP
enforcement
Increase Accountability
 Audit Clarification
 Document Retention Requirement Revision
Document Retention
 The document retention requirement has been
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expanded from 5 years to 10 years from the last date
to receive service or service delivery deadline,
whichever is later
For multi-year contracts, contract documentation
and bids must be kept for 10 years from the last date
of service under the contract
Amend E-rate document retention policy
Alert business office that vendor bills must be kept
for 10 years from the end of the funding year
Electronic records storage is permissible
Audits
 Order clarifies that under present rules, applicants
are required to allow auditors, investigators,
attorneys or any other person appointed by a state
education department, USAC, the Commission or
any other local, state of federal agency with
jurisdiction over the entity on-site to conduct E-rate
compliance inspections
Reminders
 FY2015
-Inform business office of elimination of E-rate
funding
for paging, webhosting, email and telephone
service
components beginning in FY2015, and
phase-out schedule for voice services, beginning in FY
2105
-Recalculate your E-rate discounts for districtwide simple average
-Determine if you will need C2
equipment/services
 FY2014: File 486’s
Questions?