Updates and New Initiatives USAC Staff

1. Updates and New InitiativesUSAC Staff Train-the-Trainer Workshop September 27–29, 2004 Schools & Libraries Division

2. Overview • Introduction • Statistics on Funding Years • Heightened Oversight • Updates on FCC Orders • Site Visits • Ombudsman • Outreach & Training, WebEx, Online E-mail, SP Portal, ETP

3. Introduction and StatisticsGeorge McDonald

4. Statistics on Funding Years • Demand by Year – Service Type • Commitments vs. Disbursements • Funding Threshold by Year • Online Form 470/471 Filers • E-certifications

5. Demand by Year – Service Type(in millions of dollars)

6. Commitments vs. Disbursementsas of September 7, 2004(in thousands of dollars)

7. 1998 1999 2000 2001 2002 2003 2004 Internal Connections at 70% All approved requests funded Internal Connections at 82% Internal Connections at 86% Internal Connections at 81% Internal Connections at 70% Internal Connections at ?? Funding Threshold by Year

8. Online Filers by Year – Form 470

9. Online Filers by Year – Form 471

10. Online Filers by Year – Form 471

11. E-certified Forms

12. OversightMel Blackwell

13. Heightened Oversight • E-rate program subject to heightened oversight during the last year • By whom? • Why? • What are the implications?

14. Oversight – By Whom? • Congress • Oversight of the program is part of their responsibility • Congress created the law under which the program operates (Telecommunications Act of 1996)

15. Oversight – By Whom? • Federal Communications Commission (FCC) • Responsible for developing the regulations • Accountable to Congress and to program beneficiaries for successful implementation of the E-rate program

16. Oversight – By Whom? • USAC • USAC internal audit division • Accountable to USAC Board, FCC and Congress to implement the E-rate program according to FCC rules and the Telecommunications Act of 1996

17. Oversight – By Whom? • Public in general • E-rate funds are collected from phone users • Schools and libraries — and thereby students, teachers, parents, library patrons, and others — are impacted by the program • The public has a stake in the successful results and implementation of the program

18. Oversight – Why? • Responsibility • Dollars involved —$2.25 billion each year • Program highly visible • One of the few “federal” programs that’s available for schools and libraries who meet the requirements • E-rate touches everyone • Oversight is proper

19. Oversight – What Does It Mean? • USAC • Congressional oversight – hearings • Three Congressional hearings • Various meetings with Congressional staff • Ongoing activities • GAO review • FCC oversight and proceedings, both formally (through orders) and informally (through meetings) • Audits of USAC internal procedures

20. Oversight – What Does It Mean? • Applicants and Service Providers • Results in a program that has clearer rules and procedures on how and when they should comply with program rules • Results in more available funding by reducing waste, fraud and abuse – identify and suspend bad actors and reduce excess requests • Increased USAC presence through site visits • More information and guidance from USAC on issues related to program compliance

21. Oversight – What Should You Do? • Make sure you are aware of program rules • Review materials on the web site frequently • Contact the SLD Client Service Bureau • Submit a Question through the web site • Fax questions to 1-888-276-8736 • Call 1-888-203-8100 • If something sounds too good to be true, it probably is

22. Oversight – What Should You Do? • Emphasize what you learn here with others in your state or territory • Departments of Education and State Libraries • School and library administrators • Information Technology administrators and employees

23. Oversight – What Should You Do? • Give input to USAC • Call the Whistleblower Hotline with specific information • Suggest updates to guidance materials • Consider changes you can make or influence to combat waste, fraud and abuse

24. Update on Forms andFCC OrdersJohn Noran

25. Update on FCC Forms • ALL forms currently stamped DRAFT in forms notebook • Form 470 and Form 471 • Significant changes • Covered in later presentations • Other program forms • Additional certifications proposed • Form 500 • Additional formatting changes proposed

26. Updates on FCC Orders • Ysleta Order • FCC 03-313, released December 9, 2003 • Third Order • FCC 03-323, released December 23,2003 • Fourth Order • FCC 04-181, released July 30, 2004 • Fifth Order • FCC 04-190, released August 13, 2004

27. Updates on FCC Orders • Orders available on FCC web site • Excerpts of orders available in SLD archives on web site (search in archives of release date) • Rule changes and guidance information also incorporated in presentations

28. Updates on Orders – Ysleta • Technology Plans • Form 470 must be based upon carefully thought-out technology plan • Must detail specific services sought in a manner that would allow bidders to understand the specific technologies an applicant is seeking • NOT a planning device for applicants trying to determine what is available • Form 470 developed from Tech Plan should mirror the level of complexity of products and services for which discounts are being sought.

29. Updates on Orders – Ysleta (cont.) • System Integration services • FCC rules and procedures • Contemplate that providers will bid on the cost of specific products and services eligible for discounts • DO NOT contemplate that bidders will bid solely on Systems Integration services

30. Updates on Orders – Ysleta (cont.) • Overbroad Forms 470 (cont.) • Applicant may list multiple services on Form 470, knowing that it intends to choose one over another • However, products and services must be linked in a reasonable way to the Technology Plan and not request duplicative services.

31. Updates on Orders – Ysleta (cont.) • Overbroad Forms 470 • Requirement for a bona fide request means that applicants must submit a list of specific services for which they are likely to seek discounts consistent with their Technology Plans • Should provide bidders with sufficient information to enable them to reasonably determine needs of applicant

32. Updates on Orders – Ysleta (cont.) • RFPs and Form 470 • Applicants must submit a complete description of services sought (on Form 470 / RFP) for bidders to evaluate the services in order to formulate bids. • If an applicant relies on an RFP, that RFP must be available to bidders for 28 days.

33. Updates on Orders – Ysleta (cont.) • State and local procurement rules • FCC rules apply IN ADDITION TO state and local procurement laws and competitive bidding requirements. • Example: State or local procurement law may permit an applicant to forego competitive bidding for products and services under a certain dollar threshold, but FCC rules require that applicants seek competitive bids on those products and services.

34. Updates on Orders – Ysleta (cont.) • Most cost-effective bid • Applicants must select the most cost-effective offerings. • Price must be the primary factor, but need not be the exclusive factor. • Price must be given more weight than any other factor.

35. Updates on Orders – Ysleta (cont.) • Ineligible products and services • Applicants are prohibited from using E-rate discounts to subsidize the procurement of ineligible products and services, or from participating in arrangements that have the effect of providing a discount level greater than that to which the applicants are entitled. • In general, cost allocation may be used to determine the portion of the cost that may receive discounts.

36. Updates on Orders – Ysleta (cont.) • Service provider involvement in Form 470 process • Direct involvement in the Form 470 process by a service provider would thwart the competitive bidding process.

37. Updates on Orders – Third • Upgrading/replacing Internal Connections • Starting with FY2005, eligible entities can receive Internal Connections commitments no more than twice every five funding years. • Includes shared services, but does not include consortium members who do not actually receive Internal Connections funding.

38. Updates on Orders – Third (cont.) • Basic maintenance on Internal Connections • Not subject to twice every five years rule • Only necessary basic maintenance services are eligible • Basic maintenance services are necessary if, but for the maintenance at issue, the connection would not function and serve its intended purpose with the degree of reliability ordinarily provided in the marketplace.

39. Updates on Orders – Third (cont.) • Basic maintenance on Internal Connections (cont.) • Technical support, including on-site Help Desks, is not eligible if it provides any ineligible features or functions. • The deadline for renegotiating or cost-allocating existing contracts was June 9, 2004.

40. Updates on Orders – Third (cont.) • Transfer of equipment • All transfers, without regard to whether money or anything of value has been received in return, are prohibited for three years after purchase. • After three years, equipment may be transferred to other eligible entities — but not in consideration for money or anything else of value.

41. Updates on Orders – Third (cont.) • Transfer of equipment (cont.) • If a recipient is permanently or temporarily closed: • Equipment may be transferred to another eligible entity regardless of discount level • USAC must be notified of the transfer • All recipients of Internal Connections must maintain asset and inventory records for five years sufficient to verify the actual location of the equipment.

42. Updates on Orders – Third (cont.) • Allocating eligible and ineligible costs • Must allocate to the extent that a clear delineation can be made between eligible and ineligible components. • Price for the eligible portion must be the most cost-effective means of receiving the service • Ancillary ineligible functionality need not be cost-allocated.

43. Updates on Orders – Third (cont.) • Annual update of Eligible Services List • USAC must submit a draft list by June 30 of each year. • FCC will issue a Public Notice seeking comment. • FCC will later issue a Public Notice with the final list attached. • List will represent a safe harbor for the coming year.

44. Updates on Orders – Third (cont.) • Prohibition on the provision of free services • Entities must pay the entire non-discount portion of the cost of any services they receive through E-rate. • The provision of unrelated free services by the service provider constitutes a rebate of the non-discount portion of the cost, which is a violation of FCC rules.

45. Updates on Orders – Third (cont.) • Service substitution procedures • USAC’s service substitution procedures are formally adopted and codified • Applicants may request a substitution for an eligible service with a higher pre-discount price • However, USAC will provide support based on the lower, original price

46. Updates on Orders – Third (cont.) • Lit fiber as a Priority 1 service • Dark fiber is ineligible for discounts. • The service provider is responsible for ensuring that both the fiber and the equipment to light the fiber are provided. • To receive support for services using lit fiber as a Priority 1 service, the entity must purchase a functioning service from a telecommunications service provider or Internet access provider.

47. Updates on Orders – Third (cont.) • Lit fiber as a Priority 1 service (cont.) • If a school or library has previously purchased equipment to light fiber: • The equipment may be traded in and leased back to the school or library. • The credit may not be used to pay the non-discount portion. • Under certain circumstances, this trade-in can be considered a minor contract modification.

48. Updates on Orders – Third (cont.) • On-premise Priority 1 equipment • Discounts may be provided on the lease of a single basic terminating component used at a site as a Priority 1 service • Examples: • CSU/DSU • Cable modem • Fiber-to-copper converter

49. Updates on Orders – Third (cont.) • Carryover of unused funds • USAC will file quarterly estimates of unused funds with the FCC. • The FCC will make unused funds available annually in the second quarter of each calendar year for use in the next full funding year.

50. Updates on Orders – Fourth • Direction of recovery actions • Recovery should be directed to the party or parties that committed the rule or statutory violation in question. • This applies on a going forward basis. • USAC will make the determination to whom recovery should be directed by individual cases.