OVERVIEW OF CHANGES

E-rate 2.0

Overview

Framework for ReformConnectivity GoalsDiscount Calculation ChangesPriority 1 ChangesPriority 2 ChangesInvoice ChangesProgram Streamlining MeasuresCost Effectiveness EffortsIncreased AccountabilityTribal outreachFurther Notice of Proposed Rulemaking

History

In July 2013, FCC released Notice of Proposed Rule 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 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 eligibilityThe 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

InternetWAN ConnectionsInternal Connections

Internet Connectivity Goals

SchoolsInternet 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

SchoolsDedicated data service scalable to 10 Gbps

per 1,000 students in the long termFCC 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 CalculationsLibrary Discount CalculationsRural/Urban CalculationsIncome SurveysCommunity 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 ExampleSchool Rural/

UrbanEnrollment NSLP eligibility

Plainfield Elementary U 210 120Jacksonville Middle School 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 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 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 ChangeNew ineligible ServicesPhase out of Voice ServicesWireless Data PlansBidding Exemption for Certain Bundled

Internet ServiceBundled 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

20% No FundingNo Funding No Funding No Funding No Funding

25% 5%No Funding No Funding No Funding No Funding

40% 20%No Funding No Funding No Funding No Funding

50% 30% 10%No Funding No Funding No Funding

60% 40% 20%No Funding No Funding No Funding

70% 50% 30% 10%No Funding No Funding

80% 60% 40% 20%No Funding No Funding

90% 70% 50% 30% 10%No Funding

Wireless Data Plans

Cellular data plans and mobile broadband services (such as 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 FY2015Directory assistance chargesText messagingCustom calling servicesDirect inward dialing (DID’s)900/976 call blockingInside wire maintenance plansAll 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

Bidding Exemption for Bundled Internet

“Commercially available” Broadband/Internet packages that cost less than $300 per month per building (pre-discount) 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 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 grandfatheredThis rule resulted from an FCC Order in May 2014

and is not technically in the July Reform Order

Priority 2 Changes

Name ChangeNational Funding AmountsDiscount Matrix ChangeBudgets for Funding RequestsService/Equipment Eligibility ChangesApril 1 InstallationsPreferred Master ContractsTechnology Plans

Priority 2 Overview

Traditional Priority 2 will be called Category 2Category 2 will fund Wi-Fi and related infrastructure

and equipmentCategory 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 district-wide 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 Wi-Fi) 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 staffNo 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 de-obligated more quickly to be used to make other funding commitments

Direct Invoicing

Beginning in FY2016, applicants can submit BEARs 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 ReviewElectronic Forms FilingSeptember 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 FRNIT 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

user-friendly 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 CollectionPrice Transparency

Data Collection

Form 471 will be modified to require applicants to report 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 availableFCC 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 ClarificationDocument Retention Requirement Revision

Document Retention

The document retention requirement has been 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 policyAlert business office that vendor bills must be

kept for 10 years from the end of the funding yearElectronic 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 district-wide simple average

-Determine if you will need C2 equipment/servicesFY2014: File 486’s

Questions?