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FCC Seeks Comment on 90-Day Payment Rule, Vendor Certifications

The Federal Communications Commission is seeking comments on two issues that may be of concern to E-rate stakeholders, particularly companies that participate in the E-rate program.

The Federal Communications Commission is seeking comments on two issues that may be of concern to E-rate stakeholders, particularly companies that participate in the E-rate program.

In October 2004, Sprint and BellSouth petitioned the FCC to reconsider two issues that were part of its School and Libraries Fifth Report and Order that was released on August 13, 2004.

Specifically, they asked the FCC to reconsider a stipulation that applicants that did not pay their portion of the cost of their E-rate-related services within 90 days would be presumed to be in violation of E-rate rules. The FCC adopted the rule because it said there was no standard for how quickly an applicant was expected to pay its portion of the cost, and instances had turned up in which E-rate applicants were found to have paid nothing for their products and services.

The two companies contended that the provision was adopted without adequate notice, was arbitrary and capricious, failed to reflect common billing practices in the E-rate market and the payment track record of the Universal Service Administrative Company, and has "excessively harsh consequences without necessarily preventing waste, fraud and abuse."

The companies argued that there was no evidence suggesting that companies normally refer these applicants to collection agencies once 90 days have passed, as the FCC suggested. In addition, they suggested that any problems associated with "truly deadbeat" customers or "the service providers which are granting illicit rebates/credits" would be more effectively addressed through a "well-publicized" Commitment Adjustment Order involving an applicant that had willfully failed to pay its portion of the bill.

The companies also objected to new certifications that the FCC instructed be included on the Service Provider Annual Certification form, the Form 474, which participating service providers file each year, certifying that they will follow the rules of the E-rate program. The new certification statements that the FCC wants to include would require service providers to certify, on an annual basis, that:

  • The prices offered by the service provider were arrived at independently;
  • That the prices would not knowingly be disclosed to any other offeror or competitor before a bid opening or contract award;
  • That the provider would make no attempt to induce any other concern to submit or not submit an offer for the purpose of restricting competition.


The companies said that while they did not object to new certifications per se, certification statements like these did not belong on an annual form that would be signed by someone who had no knowledge of or input into a particular competitive bid. Sprint noted that within its own company, persons preparing bids and persons preparing invoices are purposefully kept apart to ensure that invoices are not manipulated. The companies argued that when the FCC had solicited comments on this issue, it had failed to make clear where these certifications would appear.

The FCC is accepting comments on the petition through February 16, 2005, and reply comments through March 3. The FCC's announcement of its pleading cycle is available at

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