E-rate Update for Pennsylvania Applicants

1. Presented by: Julie Tritt Schell Pennsylvania E-rate Coordinator for the Pennsylvania Department of Education October 2012 E-rate Update forPennsylvaniaApplicants

2. Webinar Questions • Ask questions 2 ways: • Text questions using tool on left side of the window. • Raise hand using the tool next to your name and I will call on you to use the mic.

3. Before We Begin... • If you’re not a member of the PA E-rate Listserve, e-mail Julie at jtschell@comcast.net • If you need beginners’ training, register at: http://www.e-ratepa.org/training_outreach.htm Oct 29 – Pittsburgh Area (IU 7) Nov 5 – Philadelphia Area (IU 23) Nov 9 – Harrisburg Area (IU 15) • Because of plagerism, I may not post the full 2012 E-rate Training Manual to the PA E-rate website. If you would like a copy e-mailed to you, please send me an e-mail with the subject heading: BINDER

4. Agenda • FY 2011 & 2012 Reminders • FY 2013 Updates and Changes • Funding Outlook for FY 2013 and beyond • Bundled Equipment with P1 • Lowest Corresponding Price • Reminders of Existing Rules

5. Eligible Services List 2013 • ESL approved by FCC; No meaningful changes to eligibility of items • Significant change made to Form 470 requirement: Beginning with FY 2013, applicants may post for Priority 1 services in EITHER the Telecommunications Services bucket or the Internet Access bucket • There is no longer a requirement to guess which category should be used on the 470 for Priority 1 • Applicants still must use the correct category on the Form 471 • If you select the wrong category, PIA will not deny, but will reach out to you and ask you to change • The Form 470 form will change the next time it’s updated • But for now, PIA has been directed that it cannot deny for wrong category placement • Applicants still must select the proper Priority 2 bucket on the Form 470 (internal connections/basic maintenance)

6. Must Specify Bid Disqualification Reasons • Item 13 of Form 470 must include all reasons that bids may be disqualified or reasons must be included in RFP • Disqualification reasons must be yes/no and not scored • Examples of disqualification reasons • Bid submitted after Allowable Contract Date • Service provider must be willing to provide discounted bills • Service provider must have SPIN upon bid submission • Service provider must be bonded

7. 470s/RFPs Must be Manufacturer-Neutral Beginning in FY 2013, 470s/RFPs cannot be manufacturer-specific (known as ‘Queen of Peace Decision’) • Cannot request ‘Cisco 3750 Switch’ • Applicants may state a manufacturer, but also must include the words “or equivalent” • Can request ‘Cisco 3750 Switch or equivalent’ • May specify that equivalent bids must be compatible with existing equipment • Must accept and evaluate “equivalent” bids • In bid evaluation, may consider other factors, such as the amount of staff training required to support alternate manufacturer equipment

8. Should I Apply for P2 Funding? • Year 1 -- funded to 70% • Year 2 – all funded • Year 3 – down to 82% • Year 4 – down to 87% • Year 5 – down to 81% • Year 6 – down to 70% - significant rollover funds • Year 7 – down to 81% • Year 8 – down to 80% • Year 9 – down to 86% • Year 10 – down to 81% - $650M rollover • Year 11 – down to 87% - $600M rollover • FY 2009 – down to 77% - $900M rollover • FY 2010 -- all funded - $1.15B rollover + inflation • FY 2011 – down to 88% - $850M rollover + inflation • FY 2012 – down to 90% - $1.05B rollover + inflation

9. Will P2 Be Available in FY 2013? Let’s look at FY 2012 • $2,290,683,250 available • Demand for Priority 1 (telecom and Internet) was $2.444 billion • an increase of 12.5% from last year • Demand for Priority 2 (internal connections) at 90% discount level was $1.379 billion • All P1 and 90% P2 funded with unprecedented rollover and denials • If P1 grows again by 12.5%, P1 demand will be $2.737 billion • Very little rollover funds remain

10. Funding Predictions for FY 2013 • P1: Enough funding should be available to fund all P1 requests • P2: It is doubtful that all 90% P2 requests will be funded, at least not without pro-ration • There is a chance that no funding will be available for Priority 2 requests FY 2014? Will enough funding be available to pay for Priority 1 requests without proration? Another 12% increase in P1 = $3.065B demand

11. Rules for Proration • Specifics are a little unclear • Priority 2: 90% requests will be pro-rated so each funding request would receive a percentage of their request (you may receive 50% of the requested amount) • Priority 1: Rules say that discounts provided to neediest first, until funds run out • So applicants in the 20%, 25%, 40% discount bands would be most vulnerable

12. How Will This Problem Get Fixed? • FCC currently wrestling with this issue • Possible solutions could include: • Removing certain services from the eligible services list • Consider what this would mean if voice services were no longer eligible • Adjusting the discount matrix to decrease each discount level by 5, 10, or x% • Find other funding sources to add to E-rate • Requiring ISPs and IC vendors to pay into fund • Assessing contributions differently

13. Technology Plan Approvals • Technology plans ONLY required for entities applying for Priority 2 funding • Public schools – PDE approves • PDE requires usage of Comprehensive Planning Process for tech plan approval • Submission by November 30 for plans expiring June 30, 2013 or for CPP Phase 1 schools • CPP/Technology Plan webinar October 25, 10 – 11:30 a.m. • Nonpublic schools – various entities approve • Libraries: Approved by Commonwealth Libraries

14. Lowest Corresponding Price What is LCP? Little known E-rate rule • 47 CFR § 54.500(f): Lowest corresponding price is the lowest price that a service provider charges to non-residential customers who are similarly situated to a particular school, library, or library consortium for similar services. • 47 CFR § 54.511(b): Providers of eligible services shall not charge schools, school districts, libraries, library consortia, or consortia including any of these entities a price above the lowest corresponding price for supported services, unless the Commission, with respect to interstate services or the state commission with respect to intrastate services, finds that the lowest corresponding price is not compensatory.

15. Lowest Corresponding Price History of LCP • Lowest Corresponding Price rule was included in the original FCC Order that created the E-rate program, but has been mostly ignored by both vendors, regulators and USAC • In March 2010, USTA and CTIA filed a joint petition to the FCC seeking a declaratory ruling on Lowest Corresponding Price in response to recent audits • Apparently certain companies were being found to have overcharged customers, in violation of the LCP rule • FCC requested comments on the petition • No action has been taken to change the LCP rule, as the petition requested, but the FCC and USAC have stepped up their outreach to applicants and vendors

16. Lowest Corresponding Price Purpose of LCP Rule • To ensure that service providers do not charge schools and libraries in the E-rate program more than they would charge their other customers for the same services • To ensure that any lack of experience in negotiating in a service market does not prevent applicants from receiving competitive prices

17. Lowest Corresponding Price What is Similarly Situated? • Service providers are required to offer schools and libraries their services at the lowest corresponding prices throughout their geographic service areas. The “geographic service area” is the area in which a service provider is seeking to serve customers with any of its E-rate services. • Service providers may not avoid the obligation to offer the lowest corresponding price to schools and libraries for interstate services by arguing that none of their non-residential customers are identically situated to a school or library or that none of their service contracts cover services identical to those sought by a school or library.

18. Lowest Corresponding Price • The Commission will only permit providers to offer schools and libraries prices above prices charged to other similarly situated customers when those providers can show that they face demonstrably and significantly higher costs to serve the school or library seeking service • Factors that could affect the cost of service – volume, mileage from facility, and length of contract • Similar services include those provided under contract as well as those provided under tariff

19. Lowest Corresponding Price Who is responsible for ensuring Lowest Corresponding Price is provided? • All service providers regardless of the size of the company • The applicant is not obligated to ask for the LCP, but must receive it • A service provider’s obligation to provide the LCP is not tied to a response to an FCC Form 470 or RFP. The service provider must charge a rate that is the LCP • It is not sufficient merely just to offer the LCP in a bid response • If a service provider does not know that a school or library is participating in E-rate and therefore does not offer the LCP rate, the service provider must actually charge the LCP once they realize the school or library is participating in the E-rate program

20. Lowest Corresponding Price What can a school or library do if they think they did NOT get LCP? • 47 CFR § 54.504(c)(1): Schools, libraries, consortia including those entities may request lower rates if the rate offered by the carrier does not represent the lowest corresponding price. What can a service provider do if it thinks the LCP is not enough for the service? • 47 CFR 54.504(c)(2): Service providers may request higher rates if they can show that the lowest corresponding price is not compensatory, because the relevant school, library, or consortium including those entities is not similarly situated to and subscribing to a similar set of services to the customer paying the lowest corresponding price.

21. Lowest Corresponding Price Commission Orders also mandate: • There is a rebuttable presumption that rates offered within the previous three years are still compensatory • Promotional rates offered by a service provider for a period of more than 90 days must be included among the comparable rates upon which the lowest corresponding price is determined

22. Lowest Corresponding Price Are vendors taking this seriously? • They should. The FCC/USAC is spending a considerable amount of effort to educate the field on this rule and are expecting Code 9 calls from affected schools and libraries • Some vendors are creating special E-rate-only national sales teams to keep track of pricing/proposals just because of this newly-enforced rule

23. Let’s Talk About Bundled End-User Devices FCC’s 6th Report and Order, Gift Rule Clarification, Footnote 25, provided relief to applicants who were receiving free cell phones so they wouldn’t be in violation of the new Gift Rules: • “For example, many cell phones are free or available to the general public at a discounted price with the purchase of a two-year service contract. Schools and libraries are free to take advantage of these deals, without cost allocation, but cannot accept other equipment with service arrangements that are not otherwise available to some segment of the public or class of users. Therefore, a service provider may not offer free iPads to a school with the purchase of telecommunications or Internet access services eligible under E-rate, if such an arrangement is not currently available to the public or a designated class of subscribers.”

24. Let’s Talk About Bundled End-User Devices The Eligible Services List states: “The following charges are NOT ELIGIBLE for E-rate support: End User Equipment. Support is not available for end-user equipment.” • At least three Priority 1 VoIP service providers are claiming that free VOIP phones also are allowed to be bundled with the underlying Priority 1 service because of this footnote • Several parties have requested that the FCC clarify whether Footnote 25 was intended to allow all end-user devices to be bundled with Priority 1 service • And if so, where does it stop? • FCC will be issuing a decision on this issue in the coming months. For now, they have told us to advise our applicants to be VERY CONSERVATIVE in their reading of Footnote 25

25. Telecom Brokers Do you have to consider inquiries from Telecom Brokers? • Many applicants are being contacted by ‘telecom brokers’ • Also known as 'bid consolidating services' or 'telecom wholesalers‘ • These companies represent a certain set of telecom providers and are possibly receiving a commission if one of "their providers" is selected • These solicitations are NOT considered bids and applicants are NOT required to respond.  We have confirmed this with the SLD • You may want to state in Item 13 “We will only accept bids from vendors with SPINs. We will not respond to inquiries from telecom brokers.”

26. Off-Campus Internet/Data Usage Please remember: No off-campus usage of E-rate-funded data or Internet service is permitted, even if it’s being used for educational purposes • Includes 3g/4g service, aircard service • Cellular service usage (only) is eligible, if used for educational purposes

27. FY 2011 (E-rate Year 14) Funding Year 2011 ended June 30, 2012 for recurring services • Deadline for submitting BEARs (Form 472) is Monday, October 29, 2012 • Deadline for submitting invoices for non-recurring services is January 28, 2013 (unless an extension has been granted) • File for extension if you haven’t submitted your BEAR (or if your vendor hasn’t certified your online BEAR)! • Example of IDER will be sent to listserve this week • File Form 500 if you don’t need the funding • List of affected entities sent to listserve • If you’re on this list and you already submitted your BEAR, you’re likely listed because either USAC hasn’t yet mailed your BEAR check, your vendor hasn’t certified your online BEAR, or USAC is going to $0-fund it.

28. Reminder about Online BEARs How do you know if your vendor has certified your Online BEAR? • After you submit an online BEAR, you will receive 2 e-mails: • Immediately after you submit • After the vendor certifies the BEAR • If you haven’t received the second e-mail, contact your vendor to remind them to certify by deadline (and make sure the can certify online BEARs) • To track your BEARs (paper or online) using the Online System, go back to the Online BEAR page and click on Track Form • After submitted by applicant to vendor: Pending Validation • After certified by vendor: Passed Validation • After paid by USAC: Completed

29. $0.00-funded BEARs • When you receive the white BEAR notification letter, be sure to open ASAP • If the amount on the first page says $0.00-funded, it does not mean ‘denial’ • Create a new BEAR, correct the mistake and resubmit • If resubmitting after October 29, file for an invoice deadline extension, and then resubmit after extension is approved • Most common reason for $0.00-funded BEARs is listing that the service started 7/1/2012, instead of 7/1/2011

30. Calculating BEAR Amounts • When determining the amount to list in Column 14 on your BEAR, create a quick spreadsheet showing each month’s total charges, and total ineligible charges • What are the ineligible charges? • Varies by vendor, but these are known to be ineligible: • Property Tax Fees • Universal Service Administrative Fee • USF fees themselves ARE eligible • Late payment or finance charges • USF Cost Recovery Fees • Paper statement fees • Equipment charges (on P1 bills), such as cell phones • Equipment insurance fees • Directory listing fees • Non-published phone number fees • Payphone service • Personal usage • Here’s an example of what your spreadsheet may look like:

32. FY 2012 (E-rate Year 15) For services rendered 7/1/2012 - 6/30/2013 • FY 2012 was YELLOW • 84% of PA Priority 1 FRNs funded as of 10/12/2012 • P2 funding will cover only 90% requests • File the 486 after FCDL arrives • List of near 486 due dates sent to listserve 2 weeks ago • Many due by November 7 and 8 • If you don’t file, USAC will send you a 486 Late Notice, and give you a few additional days to file • Request discounted bills from vendors, if desired

33. FY 2013 (E-rate Year 16) For services rendered 7/1/2013 - 6/30/2014 • FY 2013 is PINK • 471 application window will likely open beginning of December and close early-mid March • Reason? USAC IT systems migrating on December 31 • Expect future windows to open in early January and close in early March • Form 470’s being accepted now! • Don’t wait until Jan to file, especially if you need to take contracts to your board

34. Don’t forget: • You must post a 470 for every service, every year, unless..... You are in a multi-year contract that was originally competitively bid using a Form 470 OR If you are purchasing P2 equipment from the PEPPM contract (PEPPM was already competitively bid on behalf of all schools and libraries)

35. PEPPM for FY 2013 • Schools applying for Priority 2 equip/svs traditionally have been able to skip the 470 and use the PEPPM contract. Two issues: 1) Current PEPPM contract expires 12/31/2013 – in middle of E-rate funding year, thus, requiring schools to submit duplicate P2 requests using SRC procedures • An extremely difficult process to navigate • We are working with PEPPM officials to have the current contract extended for an additional year • Details will be coming within the next 2 weeks whether this will happen • If the contracts are not extended, schools may wish to post their own 470’s to avoid the E-rate SRC process for FY 2013

36. PEPPM for FY 2013 2) FCC’s ‘Queen of Peace Decision’ requires 470s/RFPs to be manufacturer-neutral • This may be problematic for the PEPPM contract because the RFP bids product lines and not “or equivalent” • We are working with the FCC staff on this issue • At the very least, trying to get existing PEPPM contract grandfathered because the 470/RFP was posted before FY 2013 • If PEPPM contract is NOT grandfathered, schools will have to post their own 470’s to competitively bid the Priority 2 equipment and services they need and will not be able to use the PEPPM 470.

37. Eligible Services Reminders about changes from FY 2011 • Leased lit and leased dark fiber can be provided by a non-telco • Basic Maintenance Changes • Eligible: No-cost bundled manufacturer warranties up to 3 years • Eligible: Software, patches, online tech support (such as Ciscobase) • Eligible: Reimbursements for actual labor and break-fix cost • NOT Eligible: Unbundled warranties, insurance-type warranties, including Smartnet

38. New CIPA Requirements • New CIPA requirements became effective 7/1/2012 • Requires schools’ (not libraries) Internet Safety Policies include"... educating minors about appropriate online behavior, including interacting with other individuals on social networking websites and in chat rooms and cyberbullying awareness and response." • This means that schools are required to teach online safety to students as a prerequisite to receiving E-rate funding • Local boards decide frequency and delivery of online safety/cyberbullying education • Can’t be once every 4 years • Establish policy, follow policy and document implementation

39. CIPA Documentation • Notice of public hearing or public meeting (such as school board meeting) where CIPA policy was considered and voted upon • Agenda for meeting – show opportunity for public input/comment before adoption of CIPA policy • Other documentation for opportunity for public comment • Filtering records, purchase order • Documentation of cyberbullying/appropriate online behavior education for all minors • Curriculum, when taught, to whom, etc... • Have not heard a requirement that you must track exact student names that receive training

40. Common Filtering Questions • Are we required to filter personal devices brought to school that use their own 3G/4G access? • Are we required to filter school devices used off-campus? The FCC considers both of these ‘open questions’ at the current time. • Attorneys have told us they are carefully considering these questions and understand we need answers • Because they are considered ‘open,’ I believe it would difficult for USAC to recover funding for NOT filtering under these two situations • Regardless of whether CIPA applies, schools may want to have restrictions in their policies to ensure proper usage

41. New SPIN Change Rules • Can no longer switch vendors because of lower price • Legitimate reasons include: • breach of contract • service provider is unable to provide quality service • Bankruptcy • delayed provision of service • Must select vendor that received the next highest point value in the original bid evaluation, assuming there was more than one bidder • If no other bidders, then you may select any cost effective vendor • USAC will require bid evaluation documentation • Delayed provision of service is different and should be explained in SPIN Change request to USAC • Tell your business office! • Encourage you to appeal to the FCC if you are denied a SPIN change or need flexibility

42. Reminders: Bidding Rules Applicants cannot: • Have a relationship with service providers that would unfairly influence the outcome of the competition • Furnish service providers with inside competitive information • Provide information or grant meetings to only some bidders • Violate new gifts rules Applicants can: • Have pre-bidding discussions with potential bidders as long as that doesn’t lead to one bidder having “inside” information • Attend product demonstrations • Encourage and seek vendors to bid • Do research to determine what cost-effective solutions are available

43. Gift Restrictions All gifts from service providers to applicants are prohibited except for items that are worth $20 or less (including meals), as long as those items do not exceed $50 per employee from any one company per funding year Limited Exceptions: • Modest refreshments that are not offered as part of meal (e.g., coffee and donuts provided at a meeting) and items with little intrinsic value intended for presentation (e.g., certificates and plaques); • Charitable contributions in support of schools, including, for example, literacy programs, scholarships, as long as such contributions are not directly or indirectly related to E-rate procurement activities or decisions • Personal gifts to family and personal friends when those gifts are made using personal funds of the donor (without reimbursement from an employer) and are not related to a business transaction or business relationship Rules are always applicable, not just during the time period when the competitive bidding process is taking place

44. Mulit-tiered Evaluations Multi-tiered bid evaluations (BAFOs) are ok: • If you use a multi-tiered or multi-round evaluation process, the price of the eligible services ultimately must be the primary evaluation factor in selecting the winning bid. • Technical capabilities, such as scope or quality of service, may form the basis for conducting the first round of bid evaluations. This tier may be evaluated on a pass/fail basis or scored numerically where a maximum score is required to advance to the next tier of the evaluation process.

45. Ministerial and Clerical Errors An applicant can amend its forms to correct clerical and ministerial errors on their Form 471 applications, or associated documentation until an FCDL is issued. Examples: • Using wrong Form 470 number, wrong billed entity number, or wrong billed entity number/worksheet number on Form 471 • Listing wrong SPIN • Listing wrong contract expiration date • Inaccurately reporting the pre-discount amount on Block 5 • Leaving-off a building from Block 4 • Listing wrong service category in Block 5 • Simple addition, subtraction, multiplication or division errors • Failing to enter an item from the source list (e.g., NSLP data, uploading Block 4 data, FRN, etc.)

46. Requesting a M&C Correction • PIA will ask if this is a M&C error • Explain how the error occurred • Provide a reasonable explanation • Provide documentation that was in existence as of the date of submission of Form 470 or Form 471 • Explain that the error occurred when consulting “source list” • Contract, vendor quote, bill, invoice, RFP, NSLP documentation or student enrollment data, board minutes, budget • Any other documentation in existence as of date of submission of Form 470 or Form 471 to prove error was ministerial/clerical • PIA must approve the explanation before the change will be made

47. Where Can I Look For Information? • www.e-ratecentral.com/us/stateInformation.asp?state=PA • Enter your E-rate Billed Entity Number in upper left corner • Website shows • All FRNs • Every Funding Year • What Has Been Filed • What Has Been Committed and Disbursed • Need help? E-mail Julie at jtschell@comcast.net

48. Sample of Your Questions • Is it true that the FCC is going to increase E-Rate funds to $8 billion? • Why is E-Rate so laborious? • Will the cumbersome e-rate process ever go away? • Why is the process so utterly complex? • When will the government end erate? • Have I really done this for 15 years? • How can I win the lottery and retire early?

49. Questions?