the new e-rate overview of changes

The New E-rate Overview of Changes

Presented by:Julie Tritt Schell

PA E-rate CoordinatorAugust 4 and 11, 2014

Julie Tritt Schell, PA E-rate Coordinator - August 2014 2

Agenda

• Framework for Reform• Connectivity Goals• Discount Calculation Changes• Priority 1 Changes• Priority 2 Changes• Invoice Changes• Program Streamlining Measures• Cost Effectiveness Efforts• Increased Accountability• Further Notice of Proposed

Rulemaking• Important Reminders

• Long presentation, broken down into sections

• Questions will be taken at the end of each section

• Can be asked in the chat box or using your microphone


History of E-rate Reform

• 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

• In 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


The Big Picture...

• Focus E-rate on funding broadband connectivity to buildings and inside buildings of ALL schools and libraries

• Accomplish program overhaul without increasing the funding cap

• How? By making hard choices, like – Eliminating or phasing-out certain services and equipment– Establishing P2 funding caps per student

• Order also tries to provide some streamlining measures to make the program easier


CONNECTIVITY GOALS

InternetWAN ConnectionsInternal Connections


Internet Connectivity Goals

• Schools: Internet access of 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 long term– Measurement will be at the district level for school districts and school

level for schools that are not part of a district

• Libraries: Internet access for libraries that serve fewer than 50,000 people of at least 100 Mbps and at least 1 Gbps for libraries that serve 50,000 people or more


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 equipment.

• 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


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 CalculationsLibrary Discount CalculationsRural/Urban ClassificationIncome SurveysCommunity Eligibility Provision of NSLP


District-Wide Discount Calculations

• All discounts for both Priority 1 and Priority 2 will be calculated on a district-wide simple average basis

Formula: Total district NSLP eligible students / total district enrollment• The district-wide NSLP% is then applied directly to the Discount Matrix

(along with the urban/rural status) to determine the District’s discount that will be used for all buildings– This is identical to how libraries currently calculate their E-rate discounts

• All districts will now have a straight, district-wide discount taken directly from the discount matrix (i.e., 20, 40, 50, 60%, etc.)

• Districts will be permitted to add buildings after a FCDL is issued• For nonpublic schools and other entities that have multiple schools, those

entities should use this formula to determine their discount using all E-rate eligible students that fall under their financial or operational control


District-Wide Discount Calculations• Example:

204/430 = 47.4% NSLP eligibilityDiscount Matrix for Urban 35% - 49% NSLP Eligible = 60%

District-Wide Discount for All Schools = 60%

School Rural/Urban

Enrollment NSLP Eligibility

Plainfield Elementary U 50 45

Jacksonville Middle School U 105 43

Newville High School R 275 116

Total U 430 204


District-Wide Discount Calculations

• 204/430 = 47.4% NSLP eligibility

• 35% - 49% Urban

INCOME Measured by % of

students eligible for NSLP

URBAN LOCATION Discount

RURAL LOCATION Discount

If the % of students in your school that

qualifies for the NSLP...

...and you are in an URBAN area, your discount will be...

...and you are in a RURAL area, your discount will be...

Less than 1% 20% 25%

1% to 19% 40% 50%

20% to 34% 50% 60%

35% to 49% 60% 70%

50% to 74% 80% 80%

75% to 100% 90% 90%

District-Wide Discount for All Schools, P1/P2 Services/Equipment = 60%


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


New Urban/Rural Definition• No more county classifications• 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 have 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)

http://www2.census.gov/geo/ua/ua_st_list_all.xls

http://www2.census.gov/geo/ua/ua_st_list_all.xls


Surveys

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

collected


Community Eligibility Provision

• CEP is a new program that derives estimates of the NSLP eligible population from existing data from other income-based programs― Income NSLP eligibility applications are not collected

• Schools that have an Identified Student Percentage of 40% or more can qualify (similar to Direct Certification)— CEP schools must offer both free breakfast and free lunch daily to all

students• Schools opting into the CEP under the National School Lunch

Program will use the 1.6 multiplier as is currently permitted by USDA and other federal programs– The previous FCC guidance that CEP schools must use the NSLP data

from the year before they opted into CEP has been repealed


Community Eligibility Provision

• PDE NSLP file that’s released each January should contain NSLP eligibility figures that already include the 1.6 multiplier– That data will then be used on the Form 471, Block 4 discount

calculation worksheet– CEP schools must retain back-up calculations which may be requested

during PIA and audits• CEP-based discount rate can be used for 4 years, even if NSLP

eligibility decreases– Discount rate can be increased if NSLP eligibility increases

Questions about Discount Calculation Changes?


PRIORITY 1 CHANGES

Priority Name ChangeNewly Ineligible ServicesPhase out of Voice ServicesWireless Data PlansBidding Exemption for Certain Bundled Internet ServiceBundled End-User Equipment


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


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


Voice Phase Out Schedule

If Your District or Library’s

Discount is:

Voice Discount Will Be:

FY 2015 FY 2016 FY 2017 FY 2018 FY 2019

20% No Funding No 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 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


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


Bidding Exemption for Bundled Internet

• “Commercially available” bundled Broadband/Internet packages that cost less than $300 per month per building (prediscount) can be purchased without first posting a Form 470– 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

• Presumably applies to small schools and libraries that wish to purchase cable modem or FIOS-type bundles

• Applicants still must submit an annual Form 471 to request funding


Priority 1 Bundled Equipment Limitations

• Beginning in FY 2015, equipment is prohibited from being 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 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 July Reform Order

Questions about Priority 1 Eligibility Changes?


PRIORITY 2 CHANGES

Priority 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 now 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


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 Annual E-rate Funding Targets

• At least $1 billion will be available each year in FY 2015 and FY 2016 for Priority 2 funding

• Intent is to have $1 billion available for FY 2017, 2018, and 2019 as well– Funding will come from phase out of voice services and tightening of

certain USAC administrative procedures

• 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.)

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


Priority 2 Predictability

• Unfortunately, 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 at least 10 million students each year in FY 2015 – FY 2019


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

• 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

• Annual application is required and funding approval is subject to available funds each year


Category 2 Funding Budget Example

• The Budget Cap is the pre-discount price, not the E-rate eligible price. E-rate discounts will then apply on top of the budget cap.

• * Although 50 x $150 = $7,500, the minimum floor is invoked because school has less than 62 students

School Enrollment Budget Multiplier

5-Year Budget Cap

Plainfield Elementary 50 $150 $9,200*

Jacksonville Middle School 105 $150 $15,750

Newville High School 325 $150 $48,750


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 5-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

• After 2 years, the per-pupil/per building/per square foot formula will be reviewed and will likely continue through FCC action or administrative procedure

• Do NOT apply for more than your cap in a single year!


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

• Beginning in FY 2015, no voice or video equipment will be eligible


Category 2 Permanently Eligible Items

• Wireless Access Points• Wireless Controllers• Routers• Switches• Firewall Equipment• Internal Cabling• Racks• UPS to support eligible equipment• Cloud functionality of this equipment• Software that supports eligible equipment


Category 2 Eligibility in FY 2015 and 2016

• Caching Servers and Software – NEW!• Managed Internal Broadband Services (MIBS) – NEW!

– Services which cover the operation, management, or monitoring of a LAN or WLAN

– Includes managed Wi-Fi – Could have a contract that a vendor manages, operates and maintains

network; or,– School could own the equipment, but have a vendor manage it for

them

• Basic Maintenance Services for eligible equipment– Defined as: “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”


Category 2 Eligibility in FY 2015 and 2016

• Applicants are allowed to apply for up to $30 per year/per student for these ‘managed’ or ‘maintenance services’

• Services are slated to sunset at the end of FY 2016 unless FCC extends eligibility– 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


Category 2 - Non-Instructional Facilities

• Non-Instructional Facilities (NIFs) 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 Network Operations Centers (NOCs), applicants must allocate a portion of each school’s $150 budget toward the purchase of such equipment– Details on how this will be implemented will be given later


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 of students 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 CTC or Intermediate Units 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– May require applicants to include the preferred master contract 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

• No additional information is known at this time about these contracts or when they will be designated


Technology Plan Requirement Changes

• Beginning in FY 2015, the technology plan requirement will be repealed entirely

• This means there is no federal technology plan requirement for Priority 1 or Priority 2 funding

• I am working with PDE to revise Comprehensive Planning questions in light of this repeal

Questions about Priority 2 Changes?


CHANGES FOR CONSORTIA

Letters of AgencyDiscount CalculationsClarification on Member Discount BenefitsPriority of Application Processing


Letters of Agency

• The LOAs requirement has been expanded to now require signed LOAs from all consortium members prior to posting a Form 470

• Previously, the rules only required LOAs to be signed prior to submitting the consortium Form 471


Discount Calculations

• Consortia will continue to use the simple average of each member’s discount, BUT

• Each school district member’s discount will be calculated usig the new district-wide simple average

• Example: Consortium Member District-Wide Shared Discount

Apple School District 50%

Blueberry School District 60%

Watermelon School District 80%

50 + 60 + 80 = 190190 / 3 = 63% Consortium Discount


Clarification on Member Discount Benefits

• FCC clarified that consortia leads must “strive to ensure” that each school and library in a consortium receive the full benefit of the discount to which it is entitled

• In other words, each district is still entitled to their district discount when receiving consortium-purchased services


Priority of Application Processing

• State and regional consortium applications for broadband services will be prioritized for processing– This actually began with FY 2014 applications and has reversed the

historic trend of late review and funding of these applications


INVOICING CHANGES

Direct Invoicing of Applicants for BEARs for FY 2016 InvoicesStringent Invoice Deadline Extension Procedures


New Strict Invoicing Deadlines

• One 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)– Reason will not be required

• Late invoice deadline extension requests will not be granted by USAC

• Requests for extensions made after invoice deadline must be requested via a waiver request to the FCC– FCC will only grant requests where applicants can prove truly extraordinary

circumstances to justify a waiver

• 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 FY 2016, applicants can submit BEARs directly to USAC without requiring service provider approval

• USAC will send funds directly to applicants using electronic funds transfer (EFT)

• Applicants will need to provide bank account information to USAC in order set up EFT arrangements

• Payments will be made only to schools and libraries and not to consultants

• Not effective for FY 2013, 2014 and 2015 invoices


STREAMLINING MEASURES

Multi-Year Contract Streamlined 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 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 only be required to 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 to USAC in a format that can be used with application programming interfaces (APIs)

– Open source code will be shared where feasible which would allow third-party systems to directly enter application data

• 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 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.


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

Questions about Invoicing Changes and Streamlining

Measures?


COST EFFECTIVENESS EFFORTS & INCREASED ACCOUNTABILITY

Data CollectionPrice TransparencyDocument Retention


Expanded Data Collection

• FY 2015 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


Pricing Transparency

• The FCC intends to publish more information about prices paid by applicants for E-rate services, especially broadband, Internet access and equipment

• Intent is to try to force reductions in prices• Item 21 information will be standardized to provide meaningful

information that is easy to compare across applicants– Will be made public in electronic format in bulk data files and/or through

publicly available application processing interfaces (APIs)– 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


Expanded Document Retention Rules

• 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• Example: For FY 2015, the last date to receive service is June 30, 2016.

All documents related to FY 2014 must be kept through June 30, 2026

• For multi-year contracts, contract documentation and bids must be kept 10 years from the last date of service under the contract– Example: A 5 year contract started July 1, 2015 expires June 30, 2020.

All documents related to this contract must be kept through June 30, 2030


Document Retention – To Do

• Amend your E-rate document retention policy• Alert your business office to keep all winning and losing bids,

bid evaluations, contracts, vendor bills, cancelled checks, must be kept for 10 years from the end of the funding year

• Electronic records storage is permissible

Questions about Price Cost Effectiveness and Increased

Accountability?


FURTHER NOTICE OF PROPOSED RULEMAKING

Additional Comments Requested on Various Issues


Further NPRM on Several Issues

• Issues in FNPRM– Seek more data on growth of Internet and Broadband– Seek suggestions for definition of and incentives for consortia– Seek alternative methodologies for allocating P2 support for libraries– Seek data on need for permanent funding increase

• Initial Comments due 9/15/2014– Replies to Comments due 9/30/2014

• Next Order due to be released within next 6 months and likely will be focused on Priority 1


Reminders....

• FY 2015: – Inform business office of elimination of E-rate funding for paging,

webhosting, email and telephone service components beginning in FY 2015, and phase-out schedule for voice services, beginning in FY 2015

– Recalculate your E-rate discounts for district-wide simple average– Determine if you will need C2 equipment/services

• FY 2014: File 486s – Deadline is 120 days after FCDL data or October 28, 2014, whichever is later

• FY 2013: File Form 472/BEARs by October 28, 2014– No automatic extension– Tightened approvals for deadline extension requests

• FY 2012: File Form 472/BEARs by October 28, 2014– Automatic 1-year extension granted to all FRNs

Questions?

the new e-rate overview of changes

Documents

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proposed erate reformson

history of e

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