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   DataBus - Vol 40 No 3: April-May, 2000
California Takes the E-rate

The first-ever statewide E-rate meeting, hosted by the California Department of Education (CDE), was held March 1, drawing over 70 tech leaders to Sacramento to assist in giving California a clearer direction with E-rate implementation. Several CEDPA members were present, contributing to lively group work resulting in recommendations to the CDE. A special presenter who sits on the board of the Universal Service Administrative Company (USAC), Kathleen Ouye, spoke to the group about E-rate's past and future, giving reassuring indicators that there will be a Year 4 and Year 5 under current Congressional funding.
California was among ten states represented at a national E-rate meeting in Washington, D.C. on March 6-7, sponsored by the Council of Chief State School Officers (CCSSO) at which representatives of the SLD and FCC worked with the CCSSO representatives on current and future E-rate issues. Attendees were reminded by CCSSO officials that E-rate is the single largest existing federal education project. Although final policies will be released by the Federal Communications Commission (FCC) and the Schools and Libraries Division (SLD), there are some general trends emerging. One is the obvious over-subscribing of the program, in which $2.25 billion cannot cover the $4.72 billion requested for program Year 3. Based on prior years' experience, it is estimated that a relatively large number of the $4.72 billion in requests will not result in fully funded discounts.
Another issue is the potential for some applicants in the 80-90 percent discount range to "gold plate" their internal connections applications, requesting infrastructure systems far more complex than their recipient schools are prepared to utilize. Client Service Bureau (CSB), Program Integrity Assurance (PIA), and audit processes at the SLD compare an applicant's request with their planned access to (non E-rate) resources necessary to make use of what they are requesting. Nationally, there are some vendors who are using the E-rate program to coax high-discount applicants into agreements that are not consistent with the intent of E-rate, primarily in the areas of (a) supplying ineligible items by charging unreasonable costs for eligible items and (b) preparing the applications in such a way that conflicts of interest are apparent.
In the area of technology planning, no applicant has yet been denied solely on the basis of a weak or defective technology plan. However, in the PIA or audit stages, the technology plan is scrutinized with regard to the questioned item(s), and weak or defective technology plans have then become a part of the larger overall denial of application process. There may be a renewed effort, possibly in the fall, by the SLD to strengthen or adjust the technology planning aspects of the program.
Lastly, there is the issue of how the discount savings are being handled in various applicants' local budgets. If E-rate participants disperse the savings from discounts (principally recurring costs) into budget areas other than education technology, two dangers arise. One, the applicant may grow accustomed to "living at a discount level" with no budgetary mechanism to revert to non-discounted costs in the event discounts end. Two, if the CSB, PIA, or audit process reveals that there is not access to locally-funded resources needed to utilize the discounted goods and services, discounts may be denied.
Watch the CDE's web site (http://www.cde.ca.gov/erate/) for useful E-rate postings.
At the April 5, 2000, SLD meeting, Year 3 funding levels were approved, pending FCC's agreement to keep the total national cap at $2.25 billion.
(1) Issue Funding Commitment Letters (FCLs) to all applicants who filed inside the window for "priority 1" services, which are telecommunications and Internet access. Generally, this means that all who applied correctly in the window for discounts on phone service, data circuits, and Internet service provider (ISP) costs should be approved.
(2) Issue Funding Commitment Letters (FCLs) to those applicants who filed inside the window for "priority 2" services (internal connections) and who are at the 90 percent (or higher) discount level. Internal connections are generally the network wiring and hardware components.
(3) Not issue Funding Commitment Letters (FCLs) to those applicants who filed inside the window for "priority 2" services (internal connections) who are below the 90 percent discount level.
(4) Recognize that those applicants who filed inside the window for "priority 2" services (internal connections) and are in the 81 to 89 percent discount range MAY be funded, to some extent, based on the final rollout of all other discount commitments.
(5) Set aside $272 million for contingencies.
The release date for Wave 1 of FCLs has not been announced, nor have any such letters been issued. (The unofficial target start date is later in April.)
Follow-up after March 1 statewide meeting
1. California's larger E-rate questions have been brought to Council of Chief State School Officers (CCSSO) E-rate leadership forum, with SLD and FCC representatives. Discussions are regular and ongoing, keeping California in a contributing and knowledgeable position nationally.
2. Work is underway today to release a CDE Call For Presenters application, soliciting volunteer vendors to team with CDE and COE E-rate leaders to assemble and deliver trainings, both in preparation for Year 4 applications and for specific/complex topics such as telco accounting, contract language, and procurement options. Goal: a training calendar by mid-summer.
3. The California Public Utilities Commission (CPUC) has before it a resolution (T-16381) dealing with the California Teleconnect Fund (CTF), E-rate, and stacking. Oakland USD has been a regular participant (and the only education entity) in the CPUC work groups leading to this resolution. It will be heard May 18 in San Francisco, and it appears to have no harmful effects for current and future CTF participants and may offer relief to others who used "reverse stacking" in the earlier days of the E-rate program.
Current E-rate News
1. Year 3 funding is underway, with the first two waves of funding commitment letters already out and more on the way. Funding will cover all properly filed applications in the priority categories of telecommunications and Internet access.
2. Year 3 funding will cover all properly filed applications in the non-priority category of "internal connections" (mostly cable plant and hardware) who are at the at the 90 percent discount level and SOME properly filed applications who are at the 81-89 percent discount levels, starting with 89 percent and working down. Some California applicants have already received funding commitment letters at the 88 percent level. There are few who believe the funding will reach to 81 percent.
3. Single-entity (e.g., single-school district, single-school) applicants who are at the 80 percent discount level may be at a built-in disadvantage and may have to appeal to the FCC to seek relief within 30 days of being denied. Because ALL single-entity applications who have 50-74 percent of their students eligible for the national meals programs are set specifically and exactly at the 80 percent level, there is no differentiation between those schools, even though some may be at the 86 or 88 percent level, which would have otherwise been funded.
4. The PIA (Program Integrity Assurance) staff is aggressively checking Year 3 applications. This occurs when the applicant has not provided enough detail in their Form 471 Item 21 attachment to allow the PIA staff to determine the extent of ineligible uses as a percentage of eligible uses then, the PIA asks for additional detail. An example of this occurs in cell phone use. Instructionally-related personnel (superintendent, principal, teachers, counselors, curriculum coordinators, etc.) are eligible; non-instructional personnel (maintenance, bussing, cafeteria, security, etc.) are ineligible. When the ineligible use exceeds 30 percent of the dollars for the FRN, the whole FRN is denied. The same process applies to long-distance calling cards, and if the PIA requests the applicant to provide sample phone bills as backup details, they may just count the number of calls and determine a percentage. The key issue is that the applicant must appeal its denial to the FCC within the 30-day period if the denial appears to be based on inaccurate percentages of ineligible uses.
5. If an applicant is denied a Cisco 2500 series router on the grounds that it is an ineligible remote access server, the applicant may appeal its denial to the FCC within the 30-day period if the router's remote access port is not used or if its use is instructionally-related. That's what a Montana applicant did successfully, but that FCC decision is not necessarily precedent-setting.
6. Un-spent funds from prior E-rate program years are being used to reduce (offset) the current carriers' collection rate instead of being funneled back into the program to cover more applicants. Although the FCC has not ruled conclusively on how to dispose of these un-used funds, the current practice gives us diminishing hope of "carrying it over" into subsequent funding years.

Van Wilkinson is with the California Department of Education Educational Technology Office. He may be reached at (716) 323-4709 or by e-mail at