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December 2002

Please click on the topic below to view the most recent announcements:

 

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Miscellaneous Updates to Web Site(12/27/02)

Following is a list of the documents or pages that have changed on this web site during the past week:

The Reference Area document SPIN Change Guidance has been reformatted. This summary document on SPIN changes now links to guidance on Corrective SPIN Changes (changes that result from the correction of data entry errors or from mergers/acquisitions) and Operational SPIN Changes (changes of service providers). Both documents also provide detailed information on deadlines for change requests and instructions for submitting those requests by e-mail, fax, and mail. The documents "SPIN Correction Guidance" and "Service Changes" have been removed, as SPIN corrections are now covered under corrective SPIN changes and service changes are covered under service substitutions. Please note that an operational SPIN change will not be processed before a Funding Commitment is issued for the related Funding Request.

A new document, Priority 1 Components: Timeline for Installation, has been added to the Reference Area. This document discusses the conditions under which E-rate discounts can be provided for Priority 1 infrastructure costs incurred prior to the funding year.

The Wide Area Network (WAN) Fact Sheet has been updated to clarify the entries in the "Examples" section and expand on some of the concepts presented in other sections.

The Cost Allocation Guidelines for Products and Services that Contain Eligible and Ineligible Components has been updated to clarify the concept of ancillary use and to make some minor corrections.

The last paragraph of the What's New posting SLD Providing Clarifications on Certain Issues has been amended to clarify that applicants are encouraged - not required - to first utilize funding from other federal programs when they are seeking to provide for specialized requirements.

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Miscellaneous Updates to Web Site(12/20/02)

Following is a list of the documents or pages that have changed on this web site during the past week:

A new document, Cost Allocation Guidelines for File Servers and Other Components has been posted to the Reference Area. This document provides clarification on how to perform cost allocations for file servers.

A linked title has been added for this new document to the Reference Area alphabetical list and to the Reference Area topical list under the heading "Eligible Services."

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Holiday Hours Announcement (12/20/02)

The Schools and Libraries Client Service Bureau will be closed on Tuesday, December 24 and Wednesday, December 25, 2002 in observance of the Holiday Season. The Client Service Bureau will resume normal operations on Thursday, December 26, 2002 at 8:00 a.m. EST.

The Schools and Libraries Client Service Bureau will be closed on Wednesday, January 1, 2003 in observance of New Year's Day. The Client Service Bureau will resume normal operations on Thursday, January 2, 2003 at 8:00 a.m. EST.

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SLD Providing Clarifications on Certain Issues (12/19/02, revised 12/27/02)

In response to inquiries received, the SLD is issuing the following clarifications:

Administrative charges by state networks. Some state telecommunications networks ask their recipients of discounted services to pay an additional administrative fee to the state agency. Administrative fees added by third parties, such as state agencies that are not the actual providers of the service, are not eligible for reimbursement under the E-rate program.

"Ancillary" features versus substantial product features that are ineligible. The SLD has received reports that some service providers are bundling substantial ineligible features into product offerings, and providing the mixed-eligibility product or service at a single price. The FCC has been clear that such a mixed-eligibility offering is NOT eligible, if the applicant provides only a single price on the application without further cost allocation. (See for example FCC 97-157, paragraph 462.)

Insubstantial features can be included in a funding request without cost allocating, under a principle called "ancillary use." However, this "ancillary use" provision only applies to features that are of limited capability. Substantial ineligible functionality must be cost allocated. The document Cost Allocation Guidelines for Products and Services that Contain Eligible and Ineligible Components posted in the Reference Area of the SLD web site, provides further information about the requirement to separate the pricing for eligible and ineligible components.

Contractual exclusive access arrangements for Wide Area Network facilities. The FCC has indicated that funding is not to be provided for arrangements that reach "essentially the same result" as the building or purchase of a Wide Area Network by applicants. (See FCC 99-216, paragraph 31.) Therefore, the SLD will not provide discounts on an arrangement that provides exclusive access to Wide Area Network facilities under the contract terms. Service providers must be able to make their facilities available on a shared basis to additional parties in order to provide the cost-effective prices that are integral to the E-rate program.

Sale and lease-back of previously-funded Internal Connections components. The SLD has been asked whether Internal Connections components funded with E-rate discounts in a prior funding year can be sold to a service provider, and then leased back to the applicant.

Applicants must evaluate bids and select the most cost-effective solution for the services and/or functions they request. The pre-discount price must be the highest-weighted factor in their evaluation. Under the sale/lease-back approach, the applicants would be requesting funds for lease payments in addition to the original purchase price. Such a scenario would result in higher total costs than the original purchase, and therefore the SLD's presumption would be that the sale/leaseback does not represent the most cost-effective solution.

Duplicate funding requests in a single funding year. The SLD has previously cautioned applicants not to request funding for the same components twice in a single funding year, once as part of Priority 2 services (Internal Connections) and once as part of Priority 1 services (Telecommunications Services or Internet Access). (See item #8 in Frequently Asked Questions about Eligibility of Products and Services posted in the Reference Area of this web site.) However, SLD has seen instances where applicants have submitted duplicate funding requests.

The SLD does not allow duplicate funding requests in the same funding year. When such a duplication is discovered during the application review process, the applicant is contacted and required to cancel one of the funding requests. If the applicant does not do so, then, the SLD will cancel both funding requests to limit waste of program funds.

Seeking available funding from other federal programs before applying for E-rate. In order to make the most of E-rate funds, when applicants are seeking to provide for specialized requirements, such as service to the handicapped, they are encouraged to first utilize funding from other federal programs that focus on those requirements. As an example, the FCC administers Telecommunications Relay Services (TRS), which offers text-to-speech operators for the telephone conversations of the hearing and speech impaired. (See the FCC Consumer Facts on Telecommunications Relay Services for additional information.)

If partial funding for a product or service has been obtained from the other source, and the product or service is also eligible for E-rate funding, applicants can then seek E-rate discounts for the balance not yet funded. The amount eligible for E-rate discounts is limited to the balance that would be unpaid by the other funding source.

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Miscellaneous Updates to Web Site(12/13/02)

Following is a list of the documents or pages that have changed on this web site during the past week:

Item 21 Attachments for Form 471 has been updated with information on WAN purchase arrangements and a revised example for upfront capital costs.

Chapter 7 of the Service Provider Manual now features invoice deadline calculation information based on 120 days rather than 90 days.

Links to the Reference Area documents “Pitfalls to Avoid in Filing Form 470” and “Tips for Completing Form 470” have been removed.  This information was not consistent with the Form 470 as revised for Funding Year 2000 and later funding years.  Current information is available in the Form 470 Instructions, Free Services Advisory, Obligation to Pay Non-Discount Portion, and the Form 470 section of the Reminder box at the top of this page.

Links to the Program Description now point to the document E-RATE DISCOUNTS FOR SCHOOLS AND LIBRARIES.

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Update to Warning to FY 2003 Applicants and Service Providers (12/12/02)

In the What's New Notice posted on this web site on December 3, 2002 (below), the SLD indicated that it had "determined that a sizable number of Funding Year 2002 applications associated with a particular service provider are not consistent with Federal Communications Commission ("FCC") regulations governing the Schools and Libraries Universal Service Support Mechanism." This statement should not be interpreted as an indication that the SLD has made a commitment decision regarding applications for which it has not released a funding commitment letter as yet. The SLD is currently reviewing these applications to determine whether they comply with program requirements.

The SLD has contacted a number of schools to alert them to this review for two reasons: 1) to provide them with an opportunity to submit additional information to the SLD to demonstrate that their applications comply with the regulations; and 2) to ensure that they conduct their own careful review of their procedures and make any changes that may be necessary to ensure that their Funding Year 2003 applications would not be at risk of violating these regulations. The SLD urges all applicants and service providers to review the practices outlined in the December 3 What's New Notice and ensure that they are in compliance with program requirements.

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New Data Entry Procedure for Incorrect Library Discounts on Paper Forms 471 (12/10/02)

For Funding Year 2003, libraries must use a revised method to calculate their E-rate discounts. Because the discount for a library outlet or branch will now come directly from the Discount Matrix, the discount entered for a library outlet or branch must correspond to one of the entries in the Discount Matrix (20%, 25%, 40%, 50%, 60%, 70%, 80% or 90%). If the discount for a library outlet or branch on a paper Form 471 Block 4 Worksheet is not from the Discount Matrix, the SLD will use the next highest discount percentage from the Discount Matrix to complete data entry of the form.

Applicants should not be concerned if they see a higher discount or a higher funding request in their Receipt Acknowledgment Letters than the discount and request they submitted on their paper forms. SLD's Program Integrity Assurance (PIA) team will contact library applicants to verify the discount to which library applicants are entitled using the revised method, and adjust the discount if necessary.

For more information on the revised method for calculating library discounts, please see pages 16-17 of the Form 471 Instructions. Information is also available from the Client Service Bureau via e-mail at question@universalservice.org, via fax at 1-888-276-8736, or via phone at 1-888-203-8100.

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Miscellaneous Updates to Web Site (12/6/02)

Following is a list of the documents or pages have changed on this web site during the past week:

The Form 471 application filing window deadline has been extended to February 6, 2003.  References to the deadline date in the Form 471 Instructions have been updated.  References to the deadlines for the Form 470 and Form 471 accessed from the Reminder box phrase “Remember the deadlines for filing the forms…” have been updated as well.

The SPECIAL NOTE in the Deadline for Information Requests now defines both the winter AND summer periods during which the SLD will only enforce information request deadlines when a successful two-way contact is made.

Beginning with Funding Year 2003, libraries must determine their urban or rural status in order to apply for discounts.  The text in the Rural/Urban Classification document has therefore been changed to refer to both schools AND libraries. 

You can now access the new dynamic Entity Search feature from the Reference Area by clicking on Entity Numbers.

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"Warning to Funding Year 2003 Applicants" Revised (12/4/2002)

The notice posted on December 3 "Warning to Funding Year 2003 Applicants and Service Providers Regarding Application Patterns that Violate FCC Rules" has been revised to be more precise about the requirements with respect to the description of services on the Form 470 and the level of specificity that should be achieved in the technology plan. Changes have been made to the second major bullet and to the first sub-bullet under the third major bullet.

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Deadline for Invoices for FY 2001 Recurring Services (12/3/2002)

If your Form 486 Notification Letter was issued on or before August 11, 2002, invoices for recurring services for Funding Year 2001 must be postmarked no later than December 9, 2002. (The original October 28 deadline for these invoices was extended to December 8, 2002, as reported in a previous posting. Because December 8 falls on a Sunday, invoices postmarked on December 9 will meet the deadline.) If you are filing Billed Entity Applicant Reimbursement (BEAR) Forms 472 for recurring services, remember that those forms must be certified by the service provider before you can submit them to the SLD. You should allow sufficient time for your service provider to process your BEAR Form and return it to you so that it can be postmarked by the deadline.

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Warning to Funding Year 2003 Applicants and Service Providers Regarding Application Patterns That Violate FCC Rules (12/3/2002, revised 12/4/2002)

SLD has determined that a sizable number of Funding Year 2002 applications associated with a particular service provider are not consistent with Federal Communications Commission (FCC) regulations governing the Schools and Libraries Universal Service Support Mechanism.  SLD has begun denying these applications. 

Application and competitive bidding processes involving some or all of the following patterns and practices are not consistent with FCC rules:

  • Applicants may not post FCC Form(s) 470 indicating that there is no Request for Proposals (RFP) for the services sought in the FCC Form 470 when there is, in fact, an RFP or other solicitation method which provides that the service provider selected through the RFP or other solicitation method will appear on the applicant’s FCC Form(s) 471 funding request(s). 
    • This type of procurement activity misleads potential bidders to the detriment of the competitive process mandated by the FCC. 
    • FCC rules require applicants to select their service provider through the FCC Form 470 posting process and after complying with competitive bidding requirements. 
    • FCC rules do not allow applicants to select service providers through a process other than the process specified in Schools and Libraries Support Mechanism regulations.
  • Any FCC Form(s) 470 or RFP(s) issued by applicants that will form the basis for an FCC Form 471 application must define the specific services or functions (and quantity and/or capacity) for which funding will be sought and applicants must obtain specific cost information, including prices for products and services to be provided. 
    • Applicants are required to choose the most cost-effective alternative, with price being the single most heavily weighted factor. 
    • Applicants may not receive funding for services rendered by a  “technology partner,” “program architect,” “strategic partner,” or other systems integrator, unless the goods and services to be provided are specified. 
    • By not being specific about the services sought and not seeking prices for those services, selecting a service provider through this type of FCC Form 470, RFP or other method violates the requirement to choose the most cost-effective provider.
  • Service Providers cannot assist the applicant in developing its technology plan after the FCC Form(s) 470 has been posted.
    • Prior to posting the Form 470 for any services other than basic telephone service, applicants are required to have a technology plan that defines the educational objectives to be served by technology, the technology needs, and the resources that will be required for those technology needs. The plan must include a sufficient level of information to justify and validate the products and services sought by means of the Form 470 and, if available, RFP. If the technology plan is not sufficiently developed before posting of the Form 470, the competitive process is undermined.
  • Winning proposals cannot specify a range of ineligible services, including ineligible services such as training, consulting, and program assistance, to be provided and paid for with Schools and Libraries Universal Service Support Mechanism funding.  Providing “free” ineligible services is prohibited by program rules.
  • The RFPs and the winning proposals cannot be designed merely with the goal of “maximizing” funding.  The intent of the Schools and Libraries Universal Service Support Mechanism is to help schools and libraries afford communication services required to meet educational objectives.  An emphasis on maximizing SLD funding is incompatible with the FCC’s objective of only providing funding for the most cost-effective alternative to meet legitimate educational objectives.
  • RFPs or other solicitation methods must be tailored to the needs of each applicant.  SLD has found nearly identical language in RFPs from a variety of applicants that resulted in awards to the same service provider.  Applicants and service providers undermine the competitive process if they structure RFPs and competitive bidding processes that favor one service provider.

Funding Year 2002 requests for support based on some or all of the practices listed above either have been or will be denied. 

  • SLD is posting this notice now in order to alert applicants for Funding Year 2003 about this application pattern and to urge applicants to avoid application processes that are not consistent with FCC rules. 
  • Applicants for Funding Year 2003 who signed multi-year contracts in prior years based on the pattern discussed here should expect their Funding Year 2002 applications to be denied and may want to initiate a new process to select service providers for Funding Year 2003.   
  • Applicants who may have started a process for Funding Year 2003 similar to that described in this notice are advised to consider starting a new selection process for their Funding Year 2003 service providers. 

Note that the filing window for Funding Year 2003 has been extended from a closing date of January 16, 2003, to a closing date of February 6, 2003.

Questions regarding this notice should be directed to the Client Service Bureau.

 

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FY2003 Filing Window Extended Three Weeks to February 6, 2003 (12/2/2002)

In response to concerns from the applicant and service provider communities - and in consultation with the FCC and the USAC Schools and Libraries Committee - the Schools and Libraries Division is extending the deadline for the Funding Year 2003 Form 471 application filing window to Thursday, February 6, 2003 at 11:59 PM EST.

Those who began online Form 471 applications during the first two weeks of the window may have experienced difficulties because of technical issues involved with the migration to a new technology for the form. Although applicants could continue incomplete forms after the original online interface was restored on November 14, the SLD has determined that all applicants should have at least 74 days to complete their application process using the original interface.

The SLD will make every effort to review applications as quickly as possible in order to minimize delays in the issuance of funding commitments. The SLD will begin reviewing applications as soon as they are received, so applicants are strongly encouraged to file Forms 471 at their earliest convenience.

 


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