Unresolved changes to the eRate program in the middle of the application period have left many applicants frustrated and unsure of how to file their applications for 2004 funding, education leaders have told eSchool News.

With millions of dollars in funding at stake, school district personnel are under enormous pressure to make sure they follow the tangle of rules correctly. This pressure has always existed, but applicants say the problem is worse this year than it’s ever been, thanks to numerous reinterpretations of program rules.

Making matters worse, the agency that administers the program has been slow to issue guidance on these changes–and many issues have yet to be resolved, even as the next application deadline looms.

“The biggest frustration is the filing window being open and this still being the biggest period of transition for the program,” said Gary Rawson, infrastructure planning and eRate coordinator for Mississippi’s Information Technology Services and chairman of the State eRate Coordinator Alliance, which is sponsored by the Council of Chief State School Officers.

It’s not uncommon for school technology leaders whose institutions miss out on millions of dollars in funding because of mistakes in their applications to lose their jobs, according to several state eRate coordinators. But often these mistakes are the result of poor communication on the part of eRate officials, or last-minute rule changes that trip up applicants.

To secure 2004 discounts on telecommunications services, internet access, and internal wiring costs, schools and libraries have until Jan. 7 to file their Form 470 applications and until Feb. 4 to file their Form 471 applications.

Applicants are urged to apply well before the deadline by the Schools and Libraries Division (SLD) of the Universal Service Administrative Co., which administers the $2.25 billion-a-year program.

But as of early December, the following items still needed resolution or further clarification before applicants could safely apply:

  • Dark fiber: This year, the Federal Communications Commission (FCC) made dark fiber–unlit fiber-optic cable–ineligible as a telecommunications service, but it is still eligible as an internal connection. At press time, applicants were still waiting for clarification on what do if they’re already locked in a multiyear contract for dark fiber service and what equipment needs to be at the end of the fiber for it to be considered lit or dark.
  • Personal Identification Numbers: The SLD on Nov. 19 deactivated all PINs used to certify forms electronically after it experienced a security problem. The agency has asked applicants to reapply for new PINs, but applicants report that the automated system that issues them has not been working consistently.
  • Voice over Internet Protocol (VoIP) service: The FCC has made VoIP service ineligible until it can decide whether VoIP is a telecommunications service or an application provided over an unregulated information service. At press time, applicants were still waiting for clarification on what do if they’re already locked in a multiyear contract for VoIP service that was signed before this change went into effect.
  • Master contracts: For services provided through a state, the FCC used to require applicants to have their own contracts, but a recent resolution indicates that state master contracts now are sufficient. However, there was still reported confusion on this issue at press time.
  • State procurement laws: eRate procurement laws in some cases conflict with state procurement laws, even though applicants must comply with both. For example, the eRate requires applicants to consider the cheapest purchase price for products and services that are eligible, but some state procurement laws require school officials to consider the total cost of ownership instead. At press time, applicants were still waiting for clarification.
  • Technology plans: The SLD announced in late September that it is placing greater emphasis on its technology planning rules, which are not consistent with the U.S. Department of Education’s technology planning rules as outlined in the No Child Left Behind Act. Applicants have had to duplicate their technology planning efforts on short notice.
  • Eligible buildings: The FCC recently expanded its definition of educational use as it relates to school buildings, so on Nov. 18 the SLD removed the “Administrative Offices and Buildings Fact Sheet” from its web site. A new document, called “Eligible Users and Locations,” was supposed to replace it, but at press time applicants were still waiting for this document.
  • Entity numbers for every building: The FCC had asked for an entity number to be assigned to every building in an application, but that would result in many thousands of numbers, so a final ruling also was expected on this issue.
  • Private branch exchange (PBX) systems: Starting this year, PBXs are no longer eligible as a bundled telecommunications service. Applicants already in multiyear contracts for PBX systems were awaiting guidance on how to proceed.

‘Devastating’ effects

Usually the SLD informs applicants of new changes to the eRate program before a new program year starts through its annual September meeting for state eRate coordinators.

But this year, state eRate coordinators left the meeting with more questions than answers–not to mention short notice for significant changes.

“It’s just devastating. You can’t make a decision. You can’t file a 470,” said Greg Weisiger, state eRate coordinator for the Virginia Department of Education. “Only two months to go, and we have no idea. What do we do? We hope they give us some guidance in the not-too-distant future.”

This year is especially difficult because so many rules have been reinterpreted and now need further clarification, said Win Himsworth, president of the consulting firm eRate Central.

“For people for whom the eRate is their life and who have been applying since the first year, this is the first time they feel they could not file an application that would pass scrutiny,” Himsworth said. “To me, that is an extraordinary statement.”

These policy changes in question come from the FCC, and it’s up to the SLD to implement them.

“It would be nice if the program was static since it started, but it doesn’t work that way,” said SLD spokesman Mel Blackwell.

“There will be interpretations of policies that arise out of appeals or audits, like what happened with dark fiber,” Blackwell explained. “Or the industry–telecommunications is changing so much, like VoIP, and you have to change the rules as the industry changes.”

As for why there have been delays in issuing new rules and guidance, the FCC has a strict set of procedures for review and analysis that it must follow before decisions can be issued. “This is not something that can happen overnight,” FCC spokesman Mike Balmoris said.

But eRate applicants who spoke with eSchool News said this uncertainty adds more strain to an already stressful program.

“I lose sleep a lot. I even dream about the eRate, which is the dumbest thing,” said Della Matthias, Alaska’s state eRate coordinator, who has seen two technology directors in her state lose their jobs over the eRate.

“Both things were minor–like a missed date,” Matthias said. “Minor mistakes have such horrific consequences. It’s a tremendously stressful [environment] to work in.”

Another Alaskan school district recently discovered it will have to fulfill a multiyear contract to lease PBXs without eRate funding because bundled PBXs are now ineligible, she said.

“One of my technology directors who is caught in this [situation] is worried he is going to lose his job,” Matthias said. “He’s not sure his board will understand how he got them in this fix.”

In the dark on dark fiber

The Kenai Peninsula Borough School District in Alaska entered into a 10-year contract in 1999 to lease dark fiber from the local phone company. The dark fiber wasn’t being used by the company, and it proved to be an affordable way to provide fast internet connectivity for the district, which simply had to buy and maintain the equipment needed to “light” the fiber. At the time, the equipment was eRate-eligible.

The district, which consists of 43 schools across 26,000 square miles, took advantage of its new high-speed network by buying all new PCs, installing centralized servers, and employing remote PC management.

“This year we got the word [from the FCC] that this is no longer a permissible way to run. School districts are no longer allowed to own their own equipment and light their own fiber. They equate it with the school district starting up their own telecom company,” said Matthias. “But what about the districts caught in long-term contracts?”

The FCC is expected to resolve this issue soon–but until that happens, applicants are stuck waiting to find out what is OK to ask for on their next eRate application.

“I only have [a few] days left before the 470 needs to be done,” said Jim White, technology director for the Kenai Peninsula school district. “Before they have a decision on dark fiber, it will be too late for me to react.”

White has devised a Plan B just in case. The district could sell its equipment at fair market value to the phone company, have the phone company light the fiber, and then lease the lit fiber back from the phone company.

But that turns out to be an “oversimplified solution,” he said. The phone company doesn’t have the expertise to operate or maintain the equipment.

Another option is to downgrade to T1 service, but in Alaska, a T1 line costs about $4,000 a month, plus the cost of installation.

Plus, fiber was the building block of Kenai’s technology plan. “We designed our whole technology program around that fiber,” White said. “We’d have to redesign our whole network.”

At press time, White anxiously awaited the FCC’s decision.

“If we lose that subsidy on that dark fiber, we will have to redo everything–and we don’t have the money to do that,” he said. “To me, it’s pretty catastrophic what will happen.”

Growing complexity a problem

Bob Morrow, compliance manager for e-Rate Consulting Services, agrees that the eRate program can be tense because there is a great deal of money involved, the rules are tight, and technology directors juggle so many other tasks.

“I’ve met very few administrators who like doing the eRate. In fact, I haven’t met one,” Morrow said. “They come to us to help relieve that tension–and let’s face it, there’s a lot of tension.”

Even as a consultant, Morrow gets stressed out about the eRate.

“Every time [SLD officials] contact you, you have that little twist in your stomach and you ask yourself, ‘Oh my god, did I make a mistake?'” Morrow said.

Mistakes are easy to come by–just forget to check a box on a form, reverse some numbers, or miss a deadline.

“There are people who totally screw up and miss a deadline. They lose their job. Look at New Orleans. They keep hiring and firing technology people because their eRate applications keep getting denied,” Mississippi’s Rawson said. “Look at Florida. I’m sure heads are going to roll over that.”

Florida’s request for more than $7 million to help fund its educational computer system was rejected by federal eRate authorities for a second time. Because state funding runs out at the end of January, the state is going to have to scramble to find the money to keep the network running, the New York Times Regional Newspaper Group reported Nov. 26.

Last March, the state transferred operation of its network to Hayes E-Government Resources, which beat out three rivals for the $13 million contract. After studying the Hayes deal, the SLD last summer concluded that Florida had not followed federal rules in awarding the contract to Hayes. Those rules require that the price of the contract be the “primary factor” used in selecting a vendor.

Florida appealed the agency’s decision, but its appeal was denied in mid-November.

Melinda Crowley, chief of technology for the Florida Department of Education, oversaw the state’s application. She referred eSchool News’ request for an interview to her department’s public relations office, which refused permission.

Himsworth said the reason his clients seek the help of a consultant is because they hate applying themselves, they’re unsuccessful at it, or they can’t keep up with changes to the program’s rules and policies.

No doubt the eRate program is complicated. Just to file the Form 470, for example, applicants have 17 pages of instructions to read first. “There are things buried in there that if you don’t pay attention, you automatically get denied,” Himsworth said.

Himsworth said he believes the increasing complexity of the eRate is going to “freeze small applicants out of the program.” Small applicants often can’t handle the burden of the paperwork, keeping up with the rule changes, or the cost of hiring a consultant, he said.

It’s not just losing the opportunity for funding that has applicants concerned. The Norfolk, Va., school system and its vendors, for example, recently were told to give back more than $1.2 million in funding because an audit revealed that the SLD had incorrectly approved the district’s applications.

The funding is “in the schools. It’s used up, and now you are telling me you want it back?” Weisiger said.

Despite the stress the eRate causes those directly involved, everyone agrees the program is tremendously helpful in reducing the costs of providing telephone and internet service for schools and libraries.

The SLD maintains that, of the thousands of applications filed each year, very few are troublesome.

“There are 30 to 35 thousand people who apply for this, and 95 percent get funded without problems. There’s no stress. There’s no strain. They file their application, they get funded, and it goes well,” Blackwell said.

“We’re not saying the program is duck soup, where you ask for the money and we give it to you,” but the majority of eRate applicants are free from such horror stories, he added.

See these related links:

Schools and Libraries Division

Federal Communications Commission

e-Rate Consulting Services

eRate Central