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   DataBus - Vol 40 No. 4: June-July, 2000
California Takes the E-rate

A Summary of the Current State of E-Rate from the California Department of Education

Life After (E-rate/CTF) Discounts
Superintendent of Public Instruction Delaine Eastin sent a letter dated April 11, 2000, to all district and COE superintendents reminding them about E-rate and CTF, with a special advisory about options for use of the savings realized by these programs (http://www.cde.ca.gov/erate/de4-11-00.pdf).
The special advisory read, in part: "The CDE's advice is that the best use of savings realized by those participating in the E-rate or CTF discount program requires two components. (1) Take measures to ensure that if the discounts stop there will be sufficient locally-available funds to maintain the level of access to connectivity stated in the your technology plans. (2) Take measures to ensure that savings are directed back into education technology so that sustainability and growth of the system can continue as stated in your technology plans."
The point is: the possibility of these discounts diminishing or vanishing over time is real, and this may leave local education agencies (LEAs) facing full, non-discounted telecommunications bills. Threats to the E-rate program are coming from at least three potential directions: (1) The US Supreme Court agreed in early June to hear GTE's suit against the FCC regarding E-rate (99-1244 GTE SERVICE CORP., ET AL. V. FCC, ET AL) challenging the E-rate fee collection process; (2) There is a national election this year, and not all candidates have the same regard for the E-rate program; and (3) The Government Accounting Office (GAO) is intensifying its scrutiny of the Schools and Libraries (SLD) procedures in proportion to the potential abuses by applicants and vendors as the program matures.
In the cases of highest-discount LEAs, their bills could jump 900% if E-rate and CTF were to disappear. The effect could be a sudden shrinkage or abandonment of some WANs and a corresponding reduction in Internet access.
For further consideration is the E-rate requirement that the applicant is positioned to make use of the discounted goods and services as stated in their technology plans. As E-rate dollars shrink for internal connections (cable plant, LANs, and eligible hardware) but continue on for telecommunications and Internet access, it is possible that some LEAs will have discount-based high-capacity WAN access to the Internet without LANs and other downstream end user equipment to handle it.
This advisory is not designed to discourage, rather to refocus each LEA's attention on what is stated in its technology plan and how it will deliver on promises if the downpour of discounting dries up.
Other Recent News
May 8, 2000, Update
   1. On May 5, 2000, the FCC ordered that the Year 2 installation completion window be 1. On May 5, 2000, the FCC ordered that the Year 2 installation completion window be extended through September 30, 2000 for nonrecurring (internal connections) only (Docket No. 96-45). Contracts for these already-approved services may be voluntarily extended to coincide with the FCC's extension. This was in response to an Illinois State Department of Education waiver request that was endorsed by the Council of Chief State School Officers (CCSSO), on which the CDE is represented regarding E-rate.
   2. The FCC has given the SLD more authority to correct clerical (typographic, computational) errors without the applicant having to appeal to the FCC. This should result in more applicants being able to receive discounts.
   3. Two sensitive issues (cell phone vs. calling cards and routers with remote access ports) are in front of the FCC and decisions should be made very shortly.
   4. All Form 470s that were signed by a service provider have been purged from the SLD website and all Form 471s based on those 470s will be denied.
   5.Of all the FCC appeals (measured in dollars), about 8% are ruled in favor of the appellant.
   6. The Year 3 Form 486 was released on May 31, 2000. This will allow earlier notification and should allow more discounted services to be delivered closer to July 1.
   7. The Year 3 Form 500 (formerly 486A), also released on May 31, 2000, will make it easier to correct or reduce the amount of an FRN.
   8. The FCC is leaning towards continuing the BEAR form (Form 472) into Year 3.
   9. Wave 4 for Year 3 brings the discount level down to 86% for internal connections.
May 25, 2000 Update
The SLD posted clarification on the eligibility of certain types of routers that permit remote (dial-in) access (http://www.sl.universalservice.org/whatsnew/default.asp#052500_2). A most important aspect is that they provide specific language that the applicant must use to make the case that their router type is eligible. The language is:
"The remote access router(s) for which I seek discounts either will not be used to provide remote access in the funding year or, if it is to be used remotely, I will take steps to ensure that only entities eligible for support under the Schools and Libraries program have the capability to access it. In the latter case, for example, access will not be available from homes or other non-school or non-library sites."
June 1, 2000 Update
There are several main items related to the new (revised) Form 486:
   (1) If you already have a funding commitment decision letter for Year 3, you may file the new Form 486 now if your services are to begin July 1, 2000. See the SLD web site (http://www.sl.universalservice.org/whatsnew/default.asp#053100).
   (2) Once a Year 3 applicant selects on the new Form 486 a payment method (discounts vs. BEAR) for its first invoice, that method will remain in place throughout the whole program year. No changes mid-year. The "default" SLD position will be that if there is no BEAR, a discount arrangement has been made between the applicant and vendor.
   (3) Old Form 486s will not be accepted after mid-June, and a specific date will be stipulated by the SLD. The new forms have been mailed to all applicants through Wave 7, and there is an error on the instruction sheet regarding where the original signature must be sent. The correct instruction sheet in on the SLD web site version.
   (4) Any Year 3 applicants who used old Form 486s to try and establish a start date will have them rejected; they must use the new Form 486 for this.
   (5) Soon, the SLD will convert this form so it can be filled out online.
There are several main items related to the new Form 500:
   (1) For Year 2 applicants who need to take advantage of the FCC's recent waiver extending the completion date of non-recurring services (internal connections) beyond June 30, 2000 up to September 30, 2000, they MUST file a Form 500 now. The contract expiration date must coincide with the completion date and a Form 500 must have been filed.
   (2) Soon, the SLD will convert this form so it can be filled out online.
Other News
   (A) Applicants whose denials were based on the ineligibility of routers that have remote access should have appealed that decision within the 30-day appeal window. However, a number of applicants were not made aware of the reason (remote access) for denial until after the 30-day window was over. Unfortunately, at this time, there is no exception to the appeal window rule. The USAC/SLD staff and the CCSSO state leads all recognize the unfairness of this condition and are working on possible solutions.
   (B) "Internet access" applications that include components (even one component) necessary for the LAN to operate are generally being denied on their face. These are characterized by the SLD as "self-evident" internal connections. This may be appealed if the contract is structured precisely after the Tennessee model which, simply put, requires the contractor to provide continuous (24 X 7) Internet access to the property in such a way that the LAN operates independently of the Internet access. However, the SLD may not necessarily reveal the exact reason why it denies such applications, making it difficult to decide if an appeal is warranted.
   (C) Through Year 3 Wave 7 (approx. June 1, 2000), approximately $547 million has been committed and approximately 75-80 percent of all applicants have been contacted (30,000 applicants). Many of the large-dollar applications are still being reviewed.
Van Wilkinson is with the California Department of Education Educational Technology Office. He may be reached at (916) 323-4709 or by e-mail at