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USAC Seeks Clarification of FCC Policy on Service Provider Changes

04/19/2000 – The Federal Communications Commission announced April 13 that funding commitment letters for Year 3 of the E-rate program will start going out this week as the commission decided to set the cap for the program at the maximum level of $2.25 billion.

The FCC said that $186 million would be committed in the first wave of funding letters. Funding letters will continue to be issued in weekly waves, as they were last year.

This year marks the earliest date by which the Schools and Libraries Division will be able to begin issuing funding commitment letters for a funding year-approximately 2 ½ months before the start of the funding year on July 1, 2000. That timetable also means the letters will start going out less than three months after the close of a filing window, beating by a week or two the pace the SLD was able to achieve in the second funding year. The SLD had to wait until the FCC set the funding cap for the coming year before it could begin issuing letters.

Last winter, SLD officials had said their goal was to get all of the funding commitments issued by sometime in May, to give service providers time to implement discounted billing before the start of the filing year.  In recent weeks, various stakeholders have asked the FCC to continue to permit schools and libraries to use the reimbursement process that was put in place during the program's first two years.

The SLD has indicated that it will be able to fund all eligible requests for telecommunications services and Internet access in the third funding year. However, because the demand for support was so high, it will be able to provide funding for internal connections only to the neediest applicants. 

In the first wave, applicants with discount rates of 90 percent will be notified that their internal connections requests have been approved, but those with discount rates of 80 percent or below will be denied. Those with discount rates of between 80 and 90 percent will have to wait to find out if their internal connections requests will be funded.

In a press release, the SLD said that 38 percent of the applications processed during the funding window would be processed in the first wave: 7,400 will be funded and 6,195 will be rejected because of insufficient funding. The division said that 95 percent of the applicants notified in the first wave had filed their applications electronically.

The Universal Service Administrative Company has asked the Federal Communications Commission to clarify and possibly reconsider details of its new policy on how schools and libraries can change service providers without jeopardizing their E-rate support.

In a March 16, 2000, decision on an appeal filed by the Copan, OK, school district, the FCC relaxed some of the standards E-rate applicants had to meet before they could change providers. In that decision, the FCC said it could not anticipate all the possible reasons why an applicant might need to change providers. Instead, it said, it would simply require that the change be permissible under the terms of the original contract and state and local procurement rules, and that the applicant had notified its original provider that it was going to make the change.

In a petition filed April 14, USAC, on behalf of the Schools and Libraries Division, asked the FCC to clarify several points that it said raised operational issues for the SLD, and that had been the subject of questions from applicants and service providers. Specifically, USAC:

  • asked whether the new service provider could sign a multi-year contract if it had not responded to the applicant's original Form 470 application. The FCC's recent decision made clear that new vendors were no longer required to have responded to the original Form 470.  But USAC suggested that if the new service provider signed a multi-year contract, there would be no "establishing" Form 470 to reference on the application for future funding  years. USAC said that if applicants were permitted to reference their first Form 470, it would need to develop new procedures and systems to accommodate that change, and could not predict what those would cost. An alternative approach, it said, would be to allow applicants to sign a contract for the rest of the current year, and then file a new Form 470 to cover the future years.
  • asked whether the decision should be applied retroactively to Year 2 applicants who had requested service provider changes, were rejected and then decided to make the change anyway, foregoing E-rate support. USAC said it could accommodate retroactive payments, but needed to know whether they should be applied to the period of time before the FCC decision was issued.
  • asked whether the FCC intended for the policy to be applied to requests for tariffed or month-to-month services, as opposed to contractual situations as in the Copan district's case. The SLD believes that the FCC intends for its original, more restrictive policy to apply to instances where a contract is not in place suggested that the new process should be applied only after a funding commitment letter is issued, to keep USAC from getting embroiled in disputes between service providers.
  • suggested that the FCC should have specified that an applicant could not receive more money than was originally "committed" to the first service provider, rather than the amount that was "requested" by the applicant, as the language of the Copan decision stated.

USAC also asked the FCC to clarify how the decision relates to changing services. In the filing, it described what it said were "the FCC's current policies regarding changes in service, i.e. limiting service changes to situations where upgraded services are available or replacement services for obsolete items are available." Substitutions, it said, were allowed when "they will not result in a change in price for the products, they are consistent with state and local bidding laws and the terms and conditions of the original contract and the substituted products do not have a higher percentage of ineligible functions than the original product." 

USAC said it could continue to handle requests for services changes in the same way, no matter whether an applicant wanted to keep the same provider or make a change. USAC said it assumed it would have to evaluate changes in service providers according to these criteria, too, and said that could have an impact on its administrative workload.

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