E-Rate Modernization Order Highlights

The E-Rate Modernization Order was released by the Federal Communications Commission (FCC) on
July 11, 2014. The three goals of the program are:

  • Ensuring affordable access to high-speed broadband in schools and libraries
  • Maximizing the cost-effectiveness of E-Rate spending
  • Making the E-Rate application process and other E-Rate processes fast, simple and efficient

The FCC is focusing on increasing funding support for high-speed Internet and Wi-Fi connectivity beginning in 2015-2016 and beyond. The FCC’s objective is having Wi-Fi connect 10 million students a year to advanced educational tools, and target $5 billion more for Wi-Fi over the next 5 years. Other highlights of the E-Rate Modernization Order are:

Appeals must be submitted to USAC (Universal Service Administrative Company) first, rather than to the FCC.

BEAR Reimbursement
If you file a BEAR Form (Billed Entity Applicant Reimbursement Form, also known as Form 472) for reimbursement, in future years you will get reimbursed directly by USAC, rather than with a pass-through check from the service provider.

Category 1 and 2 Services
Priority 1 is now Category 1, and Priority 2 is now Category 2. However, the services included in each category are changing. Check out the 2015 Eligible Services List for details.

Contracts don’t have to be signed before the 471 form is submitted. There should be agreed-upon product, pricing and term length, etc., however. This could be communicated via email, for example.

Discount Percentage for Category 2
The highest discount percentage for Category 2 services beginning in 2015-2016 is 85%, not 90% as it previously was for all services.

Discount Percentage for Individual Schools
An individual school in a district will use the district’s discount rate. The district will divide the total number of students eligible for the National School Lunch Program by the total number of students in the district.

Discount Percentage for Libraries
A library’s discount rate will be based on the school district’s discount rate. If it’s a regional library district, the discount rate should be based on the school district at the main library location.

Document Retention Requirements
The document (and email) retention requirements increase from 5 years to 10 years. Examples of documentation include bidding criteria, bids, scoring, contracts, terms, etc.

Form 471
You can still file one 471, even though discount percentages for voice services and Internet will be different (see Voice Services). The online 471 will automatically calculate the different discount percentages.

Forms have been updated for the 2015-2016 funding year. See the new forms and instructions on the USAC website.

Funding Cap for Category 2
There will be a funding cap of $150 per student for Category 2 services, with a minimum of $9,200 over 5 years. There are changes in which services are funded in Category 2 for 2015-2016 and beyond, so refer the Eligible Service List for more information.

Funding Commitments
USAC is expected to provide funding commitments/decisions by September 1 of a funding year in most cases. The FCC has put this metric in place to accelerate the approval process.

Income Survey
If a school conducts an income survey to identify the number of students who are eligible for the National School Lunch Program, they will have to calculate that percentage based on the total number of students, NOT based on the number of survey responses. A minimum of a 50% response is required. Example: 300 students, 175 surveys returned, 60 students eligible for the National School Lunch Program. The percent would be calculated by dividing 60 by 300 (not dividing 60 by 175).

Ineligible Items in Bundles
If ineligible items are included as part of a bundle and are not ancillary (no separate charge, everyone gets them, no choice involved), a school/library must allocate costs for those ineligible items.

Invoicing Extensions
You can only get one chance for an invoicing extension. It will be a 120-day extension. No reason has to be provided for the extension request.

Multi-Year Contracts – Streamlined Filing
If a school or library signs a multi-year contract, the filing and review process will be simplified in subsequent years of the contract. This change will be in effect if a contract term is 5 years or less.

Phone Systems (PBX, Traditional Phone System) Funding
Funding is eliminated for traditional phone systems (formerly Priority 2 services)

Price Transparency
Price transparency will be in place – Item 21 attachments for pricing for services will be posted on the USAC website.

Technology Plan
A technology plan will no longer be required for any category of service.

Urban/Rural Discount Percentage
If there’s a school district that has both urban and rural schools, urban/rural status will be determined by the majority of the schools. For example, if there are more rural schools in the district than urban schools, the district will be considered rural. If half of the schools are urban and half are rural, the school must use the urban rate.

Urban/Rural Status Definition
The FCC will be using the Census Bureau’s definition of rural and urban status. USAC will provide a tool on the website.

Voice Services
Schools and libraries are being expected to pay more for voice services. Funding for voice services will be phased out over time. There will be a 20% reduction each year in funding until it is eliminated. For example, if a school has an 80% discount level, funding will be 60% for voice eligible voice services in 2015-2016, 40% the following year, and so on, until it’s phased out. The FCC will be evaluating the impact of this change on schools and libraries to determine if that approach should continue.