As of Feb. 1, 1999, more than 18,000 eRate applications for the 1998-99 program year have been funded, totaling more than $700 million. Over the next few weeks, an additional billion dollars will head out to schools across the country. As they would say on Wall Street, the eRate program is in the money!

With this milestone in the program, your focus in February and March should be less on “show me the money” and more on applying for the money. Now is the time to apply for 1999-2000 eRate funding by preparing and submitting Forms 470 and 471.

This article will cover some tips and strategies to help you put together a winning Form 471 as you “go for the money” in 1999.

Get your district’s average discount right

For services that will be shared across multiple schools, the applicable eRate discount level is the weighted average of the individual schools’ discount levels.

If you calculate this discount right, you’ll save a lot of time by not having to rework the number with the SLD when your application is under review. The less reworking you have to do with the SLD, the faster your application can be processed and the sooner you’ll get your funding commitment letter, which will give you more time to implement the services you’ve requested.

Furthermore, if a shared service falls under the category of internal connection, its chance of being funded is critically dependent on what the weighted average discount comes out to be. For example, as of Feb. 1, a discount level of 78 percent has a significantly better chance than that of 68 percent for receiving internal connections funding in the 1998-99 program year.

Here’s an example of how the wrong calculation can put your funding chance for shared internal connections at risk. District A has three schools, X, Y, and Z, with the following profiles:

No. of Students eRate Discount
School X: 100 60%
School Y: 200 70%
School Z: 500 90%

The wrong calculation would take the simple average of the three discount percentages:

(60% + 70% + 90%) / 3 = 73.3%

The right calculation would weigh each school’s discount by the number of students in that school, add up the weighted discounts, then divide the sum by the total number of students across all three schools:

[ (60% x 100) + (70% x 200) + (90% x 500) ] / 800 =

[ 6,000% + 14,000% + 45,000% ] / 800 =

[ 65,000% ] / 800 = 81.25%

As you can see, doing it right puts you at the 81 percent discount level and into funding possibilities. The wrong calculation would put you at 73 percent and a much longer shot at getting funding.

To help you breeze through all this math, the eRate consulting firm Funds for Learning has developed a spreadsheet that automatically calculates your weighted discount percentage. The spreadsheet can be downloaded from http://www.fundsforlearning.com/ratecalc.html.

Once you download the spreadsheet, fill in your total student enrollment and the number of students eligible for the national school lunch program for each school in your consortium or district, and the spreadsheet will calculate the weighted average discount rate for you.

Shared vs. site-specific implementation

As you may already know from working with your vendors, there are many alternative technical approaches to delivering telecommunications services and internet access to schools. While the various approaches may all technically work just fine, you might want to analyze how each approach makes use of shared vs. site-specific implementation and the financial impact it represents on the eRate equation. Let’s look at an example:

The same District A is evaluating three technical approaches to providing internet access to the three schools. The approaches are: centralized (everything is shared, minimal site-based component), distributed (everything is site-based, minimal sharing), and hybrid (interdependent sites). The cost profile for the three approaches is as follows:

Centralized Distributed Hybrid
District Office: $30,000 $2,000 $8,000
School X: $ 2,000 $10,000 $8,000
School Y: $2,000 $10,000 $8,000
School Z: $2,000 $10,000 $8,000

Let’s see how this translates into net discounted costs to the district when the eRate is factored in.

— Centralized —
District Office: $30,000 @ 81% discount = $5,700
School X: $ 2,000 @ 60% discount = $ 800
School Y: $ 2,000 @ 70% discount = $ 600
School Z: $ 2,000 @ 90% discount = $ 200
Prediscount cost: $36,000 Net discounted cost: $7,300

— Distributed —
District Office: $ 2,000 @ 81% discount = $ 380
School X: $10,000 @ 60% discount = $4,000
School Y: $10,000 @ 70% discount = $3,000
School Z: $10,000 @ 90% discount = $1,000
Prediscount cost: $32,000 Net discounted cost: $8,380

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— Hybrid —
District Office: $ 8,000 @ 81% discount = $1,520
School X: $ 8,000 @ 60% discount = $3,200
School Y: $ 8,000 @ 70% discount = $2,400
School Z: $ 8,000 @ 90% discount = $ 800
Prediscount cost: $32,000 Net discounted cost: $7,920

From the above illustrations, we can make some interesting comparisons: The prediscount cost for the distributed approach is less than that of the centralized approach, yet its cost after discounts is higher. The hybrid approach costs the same as the distributed approach before discounts—but after discounts, it costs less.

Even though these are hypothetical numbers used for illustrative purpose, the discounting effect is a real phenomenon. When it’s applied to a large dollar project, significant differences in net costs could arise. You’d be wise to analyze a proposal’s net cost, since a lower price proposal may not always turn out to be the lower cost.

Line-item veto is not just for the president

Having gone through one eRate application season, we now know that the line item veto is also a favorite thing with the SLD. That is, every line item that you enter in Block 5 of Form 471 is assigned a Funding Request Number (FRN) and becomes a discrete subject for funding decision.

For example, a Form 471 containing three line items in Block 5 would invoke three funding decisions. Each FRN could be fully funded, partially funded, not funded (out of money), or denied. With the knowledge that funding is made at the FRN level, you can adopt a strategy on whether to file for a few large line items or for numerous smaller line items. Here are some points to consider:

If you’re procuring services from multiple service providers, each FRN should pertain to only one service provider. That is, you should not combine services from two or more service providers into one FRN.

If a service provider is supplying numerous services that fall under more than one category of eligibility (telecommunications, internet access, and internal connection), then the services for each category should be filed as its own FRN. For example, if a service provider is supplying telecommunications as well as internal connections, there should be at least two FRNs for this service provider—one for telecommunications and the other for internal connections.

There are at least two good reasons for doing this: first, the SLD funds telecommunications with a higher priority than internal connections; second, the contract terms and conditions for telecommunications most likely are very different from those of internal connections (e.g., ongoing vs. one-time charges).

Even if a service provider is supplying only one category of service, you can choose to spread the services across multiple FRNs so you don’t put all your eggs in one basket. The idea here is not to let a conflict of interpretation on a service’s eligibility or the validity of its contract jeopardize all other services in the same FRN. Think of a submarine and its isolating compartments—it’s the same strategy.

If you’ve reviewed the list of eligible services published by the SLD on its web site, you may agree that it represents a good general framework but still leaves many gray areas. The pace of technology innovation and the continual enrichment of product features offered by the industry make it virtually impossible for any such list to be complete and exhaustive.

If you’re evaluating a service that is rich in functions and features—which means it does more than just eRate eligible functions—you need to interpret the rule of eligibility for this service and decide whether you want to isolate it with its own FRN.

Another benefit of spreading services over multiple FRNs is the greater control it gives you during the implementation phase. Since each FRN is funded separately, you start, stop, or cancel each one without affecting other services. This is done through Form 486, which you fill out after getting your funding commitment letter to inform the SLD on the status of a service’s implementation.

The price you pay for the benefits of spreading services over multiple FRNs is the extra work you must put in for each additional line item you fill out in Block 5. This not only represents more data entry when you’re preparing your application, but could potentially mean more follow-up with the SLD during application review due to the increased number of FRNs being reviewed.

Hopefully, this article has given you additional insight on some options and tradeoffs that you can adopt as part of your strategy for securing eRate funding. As always, the SLD holds the official guidelines on the administration of the eRate program and should be consulted for official guidance. The SLD’s Client Service Bureau can be reached at (888) 203-8100 question@slcfund.org.

As a worldwide marketing manager for universal access solutions in IBM’s Global Education Industry Solution Unit, Man Bui works with schools and libraries to help them understand, apply for, and make effective use of the eRate. He can be reached at mmbui@us.ibm.com.