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How the FCC’s New E-rate Proposal Could Impact Applicants

On April 30, the Federal Communications Commission proposed changing the priority rules for the E-rate program's fourth funding year, which starts July 1, 2001, because of the volume of requests that have been made. The Schools and Libraries Division currently projects that applicants requested $5.195 billion worth of support, about $500 million less than its original projection.

The goal of the proposal is to extend funding beyond the 90 percent schools that would likely be the only applicants to qualify for internal connections support in the coming year. However, for more than 460 applicants, it appears the effect would be to deny funding to any school within their district or any member of their consortium that had been cited as a recipient of shared internal connections services in Year 3. Districts typically apply on a shared basis for services such as network maintenance.

In the proposed rule change, the FCC said its preference would be to change the rules so that applicants that qualified for support in Year 3 would not be eligible in Year 4. Under the proposal, "for both shared services and site-specific services," the Schools and Libraries Division would be instructed to "examine each application to determine which individual sites within that application had not received funding for internal connections in the prior funding year."

The proposed change would thus deny Year 4 funding for internal connections to any applicant who qualified for internal connections support at a 90 percent discount rate. In addition, it could conceivably deny internal connections funding to all of the schools and libraries covered by the applications of at least 460 school districts and consortia that apparently qualified for Year 3 internal connections support on a shared basis at discounts ranging from 89 to 82 per cent, according to an analysis by the E-rate consulting firm Funds For Learning. FFL analyzed Year 3 commitments that had been made through last December.

Based on the analysis, the school districts of Los Angeles, Chicago, San Francisco, Philadelphia, Boston, Milwaukee, Oklahoma City, Buffalo, Newark, NJ, Providence, RI, Hartford, CT, Norfolk, VA, Alameda County, CA, Sacramento County, CA, Fresno, CA, Springfield, MA, Yonkers, NY, Youngstown, OH, Indianapolis, Birmingham, AL and Grand Rapids, MI, among others, could be denied support for internal connections for any of their schools in Year 4. In addition, schools covered by consortia applications submitted by the Puerto Rico and Guam Departments of Education and the South Carolina Office of Information Services could also be affected. Because these entities applied on behalf of a group of schools and libraries at a range of discount rates, and received funding in Year 3, all of the entities listed on their discount worksheets would presumably miss out on internal connections funding in Year 4.

Approximately 1,600 applicants at the 90 percent discount rate received $580 million worth of internal connections commitments in Year 3. In addition, applicants received another $620 million worth of internal connections support in Year 3 at shared discount rates of 89 to 82 percent. In addition, to the school districts listed above, that group included 45 library systems, including those in Brooklyn, Chicago, Birmingham, Milwaukee, and Hartford. If the FCC, through its proposal, was able to free up more funds for lower-discount applicants, those library systems would still be denied support in Year 4 by virtue of having qualified the year before.

The FCC said it had made the proposal because of fears that if 90 percent applicants received only a pro-rata share of the discounts they had requested, "it is possible that some schools may be unable to complete even part of their internal connection project, because they are unable to finance the additional funding burden." It said it was also concerned that "applicants eligible for 90 percent discounts could receive funding commitments on internal connections for two years in a row, while other schools that are also economically disadvantaged, albeit not to the same degree, could receive no discounts at all."

Comments on the proposal are due within 15 days of the proposal's publication in the Federal Register, and reply comments seven days after that.

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