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FCC Receives Comments on Draft ESL for FY2011

The Federal Communications Commission recently released and sought comment on the draft Eligible Services List (ESL) for Funding Year 2011. These comments were due on July 9, 2010 and numerous E-rate stakeholders responded, although many chose to submit their comments via the E-rate NPRM.

The ESL is the guideline for what services and products are eligible for E-rate discounts, and any conditions that must be met for eligibility. The draft 2011 ESL included numerous proposed changes, including the removal of several “infrequently requested” services. The final changes to the ESL will be in effect for FY2011, impacting the competitive bidding and technology planning taking place this fall.

Each year, the Federal Communications Commission and Universal Service Administration Company (USAC) have the opportunity to make changes to the ESL. The draft ESL is divided into sections for each service category (telecommunications services, Internet access, internal connections, and basic maintenance of internal connections) plus a section for miscellaneous items that span across all of the categories. The draft list for FY2011 included numerous changes within these categories, including designating the following products and services as ineligible for E-rate discounts:

‚Ä¢ Software applications for mobile devices, including GPS systems, and “data charges solely for the provision of those applications”
• Web hosting, domain name registration, and web servers
• Anti-virus and anti-spam software
‚Ä¢ Firewalls priced separately from a vendor’s Internet Access service
• Unbundled warranties

The comments submitted concerning the ESL overwhelmingly supported the eligibility of dark fiber. Various DOE’s and E-rate coordinators supported the eligibility of dark fiber, indicating that applicants should be able to obtain dark fiber from any vendor that offers it, regardless of common carrier status. The Utah Education Network commented that it “strongly agrees with the proposal to reinstate eligibility of leased dark fiber, lit or unlit, from any provider, for E-rate discounts. In order to ensure that this does not provide disincentives for carriers we suggest that a certification be required, much as is currently the case for on-premise priority one equipment, that makes available any excess fiber capacity to Local Exchange Carriers and competitive providers of telecommunications and Internet access services.”

It’s no surprise that the majority of the service providers who submitted comments were also in support of dark fiber eligibility. Sunesys however suggests that dark fiber should be eligible but only if provided by a telecommunications provider. They maintain that “through the bidding process, e-rate applicants are required to objectively evaluate each carrier’s service offerings and pricing. However, if a third-party non-carrier, like a municipality, has bid on a project, the recipient may feel pressured to utilize that non-carrier because of its prior existing relationship to the recipient.”

Qwest however completely disagrees with the eligibility of dark fiber. Commenting on dark fiber, the telecommunications carrier said that “the more the E-rate program distributes support to entities that do not contribute into the USF, the more telecommunications and interconnected VoIP providers are required to contribute into the Fund without obtaining effective support from the Fund. Eventually this makes the Fund unsustainable.”

Conversely from the applicant’s perspective the New York State Department of Education notes that “requiring that leased fiber be used immediately may be shortsighted. The extra cost to the fiber provider, and presumably for a customer negotiating a lease, to include extra strands for future use is small. Given the growing demand for bandwidth, having extra capacity in reserve would greatly facilitate future WAN expansions at cost-effective rates.”

The comments related to the eligibility of web hosting were mixed. The West Virginia Department of Education asks for time to allow current contracts for web hosting to expire before making them ineligible, stating that “in order for schools to secure alternative services and transfer their web pages and content to alternate resources, the WVDE asks that the FCC announces that this change will not be effective until the 2012 funding year.”

Surprisingly web hosting provider Educational Networks also agrees that web hosting should be ineligible commenting that “with the removal of E-rate eligibility from these services, applicants will be in an even better position to carefully evaluate the features of competing services because the percentage of E-rate eligibility will no longer be a distorting factor in this evaluation.” However, a large majority of web hosting service providers all agreed that the service should remain eligible.

While the changes to the ESL will be in effect for FY2011, there is not a set release date for the final ESL and it will likely be late fall 2010 before it is published. For comparison, the FY2010 ESL comments were due on June 23, 2009 and the final ESL was not released until December 2, 2009.

The period for submitting reply comments is open until the 26th of July. Reply comments can be submitted here. Any responses should reference CC Docket No. 02-6.

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