TELECOM CARRIERS ASK FCC TO CUT E-RATE DISCOUNTS

Sprint recommended the FCC reduce the maximum discount on internal connection installations to 80% starting in funding year 2005. “We are concerned that because some schools currently are required to provide funding for only 10% of the service requests, they have little incentive to select the most cost-effective configuration,” Sprint said. “Increasing the amount of the internal connections installation bill for which the applicant is ultimately responsible will encourage applicants to consider their options more carefully.” Reducing the maximum discount also will “free up more internal connections funds for schools other than the poorest in the nation” and will “help to expand the benefits of the E-rate program to a greater number of applicants,” it said.

BellSouth said it believed the highest discount available should be as low as 75%, but acknowledged “there are a number of proposals on the table that would help to address the concerns raised by the 90% discount.” For example, it said the Waste, Fraud & Abuse (WFA) Task Force suggested a maximum discount of 80% on all services, while the Southern Educational Communications Assn. proposed reducing the discounts only on some of them: “Either of these proposals would help to change the incentives in the program in a positive way.”

But the Education & Libraries Networks Coalition (EdLiNC) opposed changes to the discount matrix for now. It cited a rule recently adopted by the Commission that limited an eligible entity’s receipt of discounts on internal connections to 2 every 5 funding years, starting in funding year 2005: “With the Commission already taking strong action… to combat waste, fraud and abuse and to catalyze wider disbursal of Priority Two funds, EdLiNC does not see the reason for the Commission to take additional action… until the [new] rule has… proven unable to accomplish its stated goals.” It also said it was “extremely concerned” about the impact of a proposed discount matrix adjustment on the “poorest” schools and libraries, which it said would “find themselves paying 2 or 3 times more for E-rate eligible services. Such cost increases are potentially prohibitive for some schools and libraries, and therefore may reduce the number of economically disadvantaged schools that apply.”

The National Assn. of State Utility Consumer Advocates (NASUCA) said there were at least 4 reasons the FCC shouldn’t change the discount matrix: (1) Some schools can’t afford a 20% co-pay. (2) “If 92% of school rooms have already been connected, then most of the schools that do not qualify for the 90% discount have already been connected.” (3) “To the extend that funds are being overly committed to schools in the 90% discount band, the rule adopted in this order limiting the frequency of internal connection funding should alleviate the problem.” (4) The proposed rulemaking, which looks for ways to target the remaining unconnected rules, “should eliminate the need to change the matrix.” national assn.

Commenting on proposed rules to limit waste, fraud and abuse, NASUCA said the FCC shouldn’t require schools to get permission from their governing districts before applying for E-rate funds: “It may be more efficient to have districts, rather than individual schools, plan and apply for funds.” The Commission also should consider: (1) Requiring schools to “pursue the most cost-effective means of meeting their technological goals.” (2) “Abandoning statistical sampling as a means of determining the percentage of students eligible for the federal free lunch program.”

On recovery of funds, the National Telecommunications Cooperative Assn. (NTCA) said the FCC should address pending petitions for reconsideration of its Commitment Adjustments Order before extending it to cover additional violations of E-rate policy. It also said it believed that “service providers should not automatically be required to repay E- rate money in the absence of culpability.” SBC said current rules, which require Universal Service Administrative Co. to recover funds erroneously disbursed only from service providers even when they fully comply with the program requirements, were “inequitable and inefficient, and discourage service providers from bidding on e-rate projects.” It said the Commission should focus on the parties that were “responsible for, or benefited from, the disbursement.” It also said the Commission couldn’t seek recovery of “any more funds than those that were erroneously or improperly disbursed.”

BellSouth said the Commission should “at least establish interim policies” clarifying that “when it seeks recovery of disbursed program funds, the Administrator will look primarily to the applicant, and not the service providers, since it is the applicant who has the most knowledge and responsibility for the application and who actually receives the benefit.” Verizon said the Commission should “direct the Administrator not to seek repayment of E-rate funds that would have been properly disbursed but for a technicality.” It also said the FCC should “require USAC to set time limits” for recovering funds disbursed in error.

Sprint said E-rate funds erroneously disbursed “as the result of actions by either the applicant or the program administrator should be recovered directly from the applicant, without the involvement of the service provider… There is no rational basis for unnecessarily inserting the service provider into an awkward and often expensive process.”

Qwest urged the Commission to improve competitive bidding. In particular, it said the agency should require schools and libraries to post a request for proposal when they submit a Form 470 to USAC, so “service providers have a meaningful opportunity to participate in the competitive bidding process.” EdLiNC asked the Commission to eliminate the Form 470 process for recurring services, such as local and long distance telephone access, Internet access, existing telecom services and cell phone services, saying it would be “beneficial for the program.”

On the definition of “rural area,” NTCA urged the Commission to adopt one that’s “inclusive, administratively easy and is reasonably stable from year to year. A grandfather clause should be instituted to ensure that areas currently qualifying as rural will continue to be considered rural even if they do not qualify under the new definition.” Verizon said the definition of rural should “track that which is adopted for rural health care.” But it said the Commission “should not broaden the definition of Internet access to conform with the recently adopted rural health care definition, as there is no evidence such a rule change would be ‘economically reasonable,’ as required by the Act.”