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Applying E-rate Rules Retroactively

The general intent of the 1996 Telecommunications Act, in which Congress created the E-rate program, was to spur competition within the telecommunications industry. This is a laudable goal as one of the basic tenants of the E-rate program is that all E-rate projects need to be competitively bid and the process is fair and open to any potential bidder. The FCC and USAC have provided many rules, regulations, and guidance to ensure that this happens and that schools can get cost effective solutions that meet their individual technology needs.

I applaud the FCC and USAC for their zero tolerance stance on competitive bidding violations.

That being said, from time to time, USAC will release new guidance and then retroactively apply that to select applicants and service providers. This of course, should not happen. Most stakeholders will follow the regulations as long as they know what the rules are ahead of time.

An example of retroactive application happened between Funding Years 2010 and 2011. Each fall, the SLD holds stakeholder training in order to help everyone understand how to apply successfully while staying in compliance. In the fall of 2009, in a “Program Compliance” Power Point designed to assist stakeholders with applying for FY2010, the SLD specifically states that applicants can impose some restrictions on potential bidders.

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For example, applicants may require service providers to provide services that are compatible with one kind of system over another (e.g. Apple vs. Windows).

In FY2010 there were approximately 1,400 Forms 470 that specified one system (manufacturer) or another.

Then the SLD released new guidance for FY2011 and unfortunately, the SLD has recently denied three applicants and four service providers nearly $900,000 in funding for FY2010 because:

This FRN will be denied because the Form 470 that you have cited contains manufacturer specific make and model of products and/or services. This is a competitive bidding violation because it deters a service provider from submitting a bid for equivalent services which may be more cost effective and interferes with the fair and open competitive bidding process required by FCC rules.

The SLD clarified in the trainings for FY2011 applications, that this type of competitive bidding will now be unacceptable; however, the SLD has arbitrarily and retroactively applied this rule to several stakeholders for FY2010.

As I mentioned, most stakeholders do their best to follow the rules, regulations and shifting guidance the best they can, however, application denials should never be for rules and guidance that are retroactively applied. I hope the SLD will correct those mistakes in order for these select stakeholders to receive their E-rate funds.

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