FCC Tells USAC Not to Deny E-rate Fiber Bids Solely Due to "Apparent Confusion" on Form 470
The FCC directed the Universal Service Administrative Co. not to reject E-rate requests for fiber USF support in funding year 2018 (starting July 1) because of discrepancies caused by "apparent confusion" over USAC changes to its online menu for submitting a form to solicit competitive service bids. "While USAC's efforts in August 2017 were intended to simplify the application and competitive bidding process for stakeholders, it now appears that a significant number of applicants were unclear about how to navigate the FCC Form 470 drop-down menu consistent with USAC's guidance," said a letter to USAC from Wireline Bureau Chief Kris Monteith and Managing Director Mark Stephens posted Tuesday. The letter also directed USAC to add clarifying language to the dropdown menu for FY 2019. USAC didn't comment Wednesday but it takes orders from the FCC.
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The commission letter was praised Wednesday by E-rate stakeholders who feared many applications would be rejected due to inadvertent errors caused by USAC Form 470 instructions and guidance they said were confusing (see 1804110026), though some had continuing concerns. "This letter averts a potential disaster in which thousands of E-rate fiber applications could have been denied over a technicality," said John Windhausen, executive director of the Schools, Health & Libraries Broadband Coalition. "While this letter is a good step forward, the E-rate fiber program continues to be a work in progress. There are still many E-rate fiber applications that are being held up due to uncertainty about the cost-effectiveness standard. We recognize the hard work being done by USAC and the FCC to address these issues going forward."
The FCC action takes care of the concern "for now," emailed Gary Rawson, chairman of the State E-rate Coordinators Alliance. "This solves one critical problem related to traditional E-rate applications that would have led to thousands of applicants having their applications for bundled internet service denied due to an ill-advised form change in the E-rate Application System," emailed Evan Marwell, CEO of EducationSuperHighway. "It does not do anything to address the delays and denials issues related to fiber projects."
The agency staffers noted concerns applicants could be denied if they chose an "Internet Access and Transport Bundled" Form 470 menu option -- which was changed to exclude fiber in August -- and then selected a fiber service on their Form 471 application for funding. "The changes made by USAC to the 'Internet Access and Transport Bundled' and 'Transport Only -- No ISP Service' drop-down menu options ... were not apparent from the text of those options in the FCC Form 470 drop-down menu," said the letter. "[W]e direct USAC not to deny an FY 2018 application solely because the applicant chose the 'Internet Access and Transport Bundled' or 'Transport Only -- No ISP Service' option on its FCC Form 470 and subsequently selected a fiber service on its FCC Form 471. For those applications, USAC should not find a competitive bidding violation so long as (1) the service requested on the FCC Form 470 matches the service selected on the FCC Form 471, regardless of whether it is provided via fiber; and (2) the applicant has otherwise complied with all of the Commission's competitive bidding rules."
For FY 2019, USAC is directed "to specify within the wording of the drop-down menu option itself those options that include only 'non-fiber services' and those that include 'fiber services,'" the staff letter said. They also directed USAC before July 1 to give stakeholders "clear guidance on the FY 2019 FCC Form 470 drop-down menu options and to take whatever measures necessary to ensure that applicants fully understand those options."
The American Library Association is encouraged the FCC listened and directed USAC "to address the immediate problems with the FY 2018 application that might have led to denials through no fault of applicants," emailed Marijke Visser, ALA senior policy advocate. "The additional directive for FY 2019 will prevent further confusion and ensure fair consideration for every library that invests time and energy into the E-rate application process.”
Others had mixed reactions, including the Ohio Information Technology Centers, which first flagged the issue in an ex parte filing. "We were pleased that the ex parte was able to ameliorate some of the damage which could have been done," emailed counsel Rebecca Jacobs Goldman of Womble Bond. "Despite this short term success, however, the FCC’s May 1st letter failed to address the fundamental problem that USAC has been acting ultra vires by changing the information requested on the Form 470 without any formal guidance or notice and comment period from the FCC, which was and continues to be a violation of the FCC’s rules and other statutory requirements. The confusion caused by USAC’s guidance is exasperated by the fact that the FCC has specifically held that USAC guidance is non-binding."
"The FCC letter is very good news as they did address the concerns," emailed Deborah Sovereign, owner of Kellogg & Sovereign Consulting. "However, the guidance is fairly restrictive and may still create issues for applicants who did not correctly select at least one of the proper drop downs or in cases when the [E-rate Productivity Center] program itself auto-changed the drop downs. ... Guidance for 2019 still requires applicants to have technical knowledge on which services will or will not need fiber." The FCC didn't comment Wednesday.