E-RATE 2.0 Summary of E-rate Modernization

Overview • Framework of Reform • Connectivity Goals • Discount Calculation Changes • Priortiy 1 & 2 Changes • Invoice Changes • Program Streamlining Measures • Cost Effectiveness Efforts • Increased Accountability • Tribal Outreach • Further Notice of Proposed Rulemaking

History • July 2013 – FCC releases Notice of Proposed •

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Rulemaking December 2013 – Tom Wheeler becomes FCC Chairman, vows to modernize E-rate March 2014 – FCC issues Public Notice seeking comments on proposed E-rate reform July 11, 2014 – FCC votes 3-2 to adopt proposed reforms July 23, 2014 – E-rate order is released detailing changes

The Big Picture • Focus E-rate on funding broadband connectivity to and inside buildings

• Accomplish program overhaul without increasing the funding cap • Limited funds = hard choices • Phase out voice phone services and end funding of other legacy services

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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 equipement; 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

Growing Pains The Pain: • In FY2015 certain P1 services not deemed essential for broadband

connectivity and will no longer be eligible • Phases down of voice telecommunications services funding begins in FY2015, 20 discount percentage points per year. • Very Narrow Wireless data plans eligibility

The Gain: • All schools and libraries will have access to P2 • Dedicated $1 billion annual fund for Wi-Fi equipment • Apply based on budget amounts of $2.30 times the square foot of the

library(inside the four walls)/$9200 per building minimum so no applicant receives disproportionate funding • FCC projects it will cost $5 billion over 5 years to fund all applicants’ Wi-Fi equipment projects • Streamlining procedures to ease application process

CONNECTIVITY GOALS Internet WAN Connections Internal Connections

Internet Connectivity Goals • Libraries - At least 100 mbps for libraries that serve fewer than 50,000 - At least 1 Gbps for libraries that serve 50,000 people or more

WAN Broadband Connectivity Goals • Libraries: If libraries are connected by a WAN, the

measure will be the total number of libraries that have a connection capable of providing a data service scalable to at least 10 Gbps • There are no short term WAN connectivity goals

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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/WLAN capacity and coverage • Specific goals will be developed at a later time

DISCOUNT CALCULATION CHANGES District Wide Discount Calculations Library Discount Calculations Rural/Urban Classification Income Surveys Community Eligibility Provision of NSLP

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Library Discount Calculation • Library systems that have branches or outlets in more

than 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 applicable to central outlet or main office when applying as a library system or on behalf of individual libraries within that system

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New Urban/Rural Definition • Current rural/urban county classifications no longer in use for FY 2015 • 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 are 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)

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Surveys • Income survey results can no longer be extrapolated • Discounts will only be based on the income surveys

actually collected

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Community Eligibility Provision • CEP program provides a new alternative to NSLP household applications • •

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for free and reduced price meals in high poverty LEAs 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 Newly Ineligible Services Phase out of Voice Services Wireless Data Plans Bidding Exemption for Certain Bundled Internet Service Bundled End-User Equipment

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Priority 1 Overview • Traditional Priority 1 will be called Category 1 • Category 1 will 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

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Priority 1 Service Eligibility Changes • Beginning in FY 2015, paging, webhosting, certain

telephone service components and e-mail will no longer be eligible • Beginning in FY 2015, 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 FY 2019

• Cellular data and mobile cellular broadband services

subject to strict cost effective scrutiny

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Voice Phase Out Schedule If Your District or Library’s Discount is: 20%

Voice Discount Will Be:

FY 2015

FY 2016

FY 2017

No Funding No Funding No Funding

FY 2018

FY 2019

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

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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 a showing that 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

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Voice Telephone Service Components • Ineligible as of FY 2015: • Directory assistance charges • Text messaging • Custom calling services • Direct inward dialing (DIDs) • 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 FY 2013 or 2014 BEARs or 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 Form 470 competitive bidding requirement for FY 2015 Minimum speed must be 100 mbps downstream and 10 mbps upstream Cost must be based per building and cannot be averaged across multiple buildings Annual cost of $3600 must include all equipment and installation charges and monthly recurring charges Applicants must still submit Form 471 application for funding each year

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Priority 1 Bundled Equipment Limitations • Beginning in FY 2015, equipment is not permitted to be •

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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 from the prediscount 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 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

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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%, 88%, etc.)

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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%

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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 FY 2015 – FY 2019 • FCC Chairman: “All schools and libraries will have access to P2 funding once every 5 years.”

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Category 2 Funding Budgets • Each library building will be permitted to apply for a pre-

discount cap of $2.30 per square foot or a minimum building cap of $9200, over a rolling five-year basis • Square footage shall include areas off-limits to the public

• 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

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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 funding years of a five-year cycle • No look-back provision for applicants funded in years prior to FY 2015 • All competitive bidding requirements will continue to apply and applicants can only apply for what they need • Possible Preferred Master Contract bidding exemption

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Priority 2 Eligibility Changes • Beginning in FY 2015, 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 FY 2015 and 2016 and may sunset unless FCC extends eligibility for FY 2017 and beyond • Other equipment currently eligible will no longer be eligible • Voice components • Video components

• Most servers

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Category 2 Permanently Eligible Items Routers

Switches

Wireless Access Points

Internal Cabling

Racks

Wireless Controller Systems Uninterruptible Power Supply Equipment

Firewall Services

Software to Support Eligible Cloud Based Functionality Equipment of this Equipment

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Category 2 Eligibility in FY 2015 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 LANs/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 intended 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 FY 2016 • Exception to Sunset: Applicants that received funding approval in FY 2015

and/or FY 2016 for these items may continue to obtain funding for FY 2017-FY 2019

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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

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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 in response to the applicant’s Form 470 • PMC designations must be reevaluated every two years

• PMC process is being established by FCC staff • No PMCs have been designated yet

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Technology Plan Requirement Changes • Beginning in FY 2015, 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

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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 extension 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

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Direct Invoicing • Beginning in FY 2016, 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 set up electronic funds transfer arrangements Payments will be made only to schools and libraries and not to consultants Unsure whether direct payment to applicants is an option or a requirement

STREAMLINING MEASURES Multi-Year Contract Streamlined PIA Review Electronic Forms Filing September 1 deadline for FCDLs for fundable applications

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Multi-Year Contract Application Streamlining • Multi-year contracts with a term of five or less years will

have a streamlined 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

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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 to USAC in a format that can be used with application programming interfaces (APIs) • Plain language communications in a simple, direct, and

user-friendly manner

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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 2016 • USAC is undertaking an IT Modernization Process to upgrade and enhance online experience • 471 changes for FY 2015 • Integration of Item 21 into Form 471 for FY 2015 • Major overhaul for FY 2016/17 including Applicant Portal • Support for multiple web browsers, etc.

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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

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Data Collection • Form 471 will be modified to require applicants to report

information to measure progress toward meeting connectivity goals • The Order is 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

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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

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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 as 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 service providers are obliged to ensure that the price charged to applicants complies with LCP • FCC’s Enforcement Bureau intends to increase LCP enforcement

INCREASED ACCOUNTABILITY Audit Clarification Document Retention Requirement Revision

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Document Retention • The document retention requirement has been expanded

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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 from 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

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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 local, state or federal agency with jurisdiction over the entity on-site to conduct E-rate compliance inspections.

Questions

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