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Synopsis of E-rate NPRM: Application Simplification

There have only been a few Notices of Proposed Rule Making issued for the E-rate program since its inception. As such, the NPRM released on May 20, 2010, is chockfull of proposed rules the FCC is looking to extend or establish. The first area which would see an expansion of program rules is the E-rate application process itself.

E-rate Application Simplification
One goal the FCC has in mind for the E-rate program is the simplification of the application process. This includes everything from eliminating technology plans for applicants seeking priority one funding, to a revised calculation of discount rates. The program has become increasingly complex and the number of appeals has increased dramatically. By simplifying the application process, the FCC hopes to streamline the process while still retaining the program’s integrity.

Technology Plans
In order to receive funding under the E-rate program for services other than telecommunications, applicants are required to first develop a technology plan which must include five essential elements. The plan must then be approved by a certified technology plan approver. Applicants must have a draft technology plan in place at the time of the Form 470 posting and have the plan approved by the time services commence.

The Commission proposes to eliminate the technology plan requirement for priority one funding requests that are otherwise subject to technology plan requirements under the applicant’s state or local laws. Applicants whose telecommunications needs are fairly straightforward would benefit by not being required to develop a technology plan that is unnecessary and burdensome. Additionally, the FCC proposes a separate technology plan requirement for larger priority one funding requests that would essentially set a dollar limit for applicants who would be required to have a technology plan (i.e. all applicants requesting telecommunications funding at $1M or more).

Forms 470
After a technology plan has been developed applicants must file a Form 470. Currently applicants must wait a minimum of twenty-eight days after the filing of the Form 470 before entering into a contract with a service provider. The NPRM suggests that the posting of a Form 470 should be eliminated along with the twenty-eight day waiting period for priority one applications subject to public procurement requirements. The present competitive bidding regulations would remain the same for priority two applicants. Under the proposed regulations, applicants would begin the E-rate application process by filing a Form 471. The FCC further emphasizes that the proposed elimination of the Form 470 is due to the complexity of the form which has been the basis for a high number of request denials by USAC.

The Commission proposes that for applicants who are not subject to state and local bidding requirements continue to be required to file a Form 470 and wait the mandatory twenty-eight days to select a service provider. Applicants whose state does not outline bidding requirements will also be required to continue to post the Form 470 and wait the requisite amount of time. The FCC states that this would be less burdensome for applicants to learn and follow state procurement rules that don’t actually apply to them.

The Commission does make clear that applicants for both priority one and priority two services continue to comply with the rules governing the consideration of bids. The promulgated rules would codify the fairness and openness requirement of the competitive bidding process. This would include express guidance on the type of conduct that would satisfy or violate the rules. Additionally, the NPRM proposes to continue to require applicants to select the most cost-effective service with price as the primary factor being considered.

The Forms 470 and 471 are scheduled for this facelift for FY 2011. Considering the time period in which this NPRM was issued and the timeframe allotted for comments and review of comments, it is highly unlikely that these changes to the Forms would happen for FY 2011, which begins on July 1, 2010. However, the FCC is working with USAC to streamline the application format and accessibility of program forms and tools online. Since the FCC will be working in cooperation with USAC to enhance the online experience for applicants, all Forms 470 and 471 will be required to be filed electronically.

Discount Percentages
Another area highlighted in the NPRM focuses on the determination of discount rates. The FCC would like to revise the rules pertaining to the manner in which discounts are calculated by using the average discount rate rather than the weighted average for each school site. In an effort to reduce the complexity of discount calculations the Commission proposes to calculate the discount percentage in the following manner:

(1) calculate a single discount percentage rate for the entire school district by dividing the total number of students eligible for the National School Lunch Program by the total number of students in the district; and then
(2) compare that single figure against the discount matrix to determine the school district’s discount for priority one and priority two services

The promulgated rule would further simplify the way in which schools compute their discount percentage and reduce the administrative burden on USAC by eliminating the SLD’s discount percentage verification of each individual school’s discount rate. Further, the FCC proposes the adoption of a new definition for “rural area” to determine whether applicants quality for the rural discount. The Commission suggests that the definition of rural area be consistent with the U.S. Department of Education’s National Center for Education Statistics (NCES) urban-centric locale codes.

The FCC E-rate NPRM can be viewed here.

A sampling of the proposed E-rate rules seeking comment can be found here.

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