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eRate changes aim to cut costs, boost efficiency

New rules encourage greater eRate transparency, volume purchasing

Greater transparency wasn’t the only rule change intended to control costs.

[Editor’s note: This is the sixth and final article in a series examining the new eRate rules and how they will affect schools.]

Starting next year, eRate applicants will be able to see how much other schools are paying for similar kinds of services, under one of many changes designed to keep costs down and simplify the nation’s school wiring program.

This greater transparency into eRate contracts could lead to better pricing on telecommunications services, internet access, and internal connectivity for U.S. schools and libraries.

The eRate provides discounts ranging from 20 percent to 90 percent of the cost of these services to eligible schools and libraries. Now indexed to inflation, the program will supply more than $2.4 billion in funding this year.

To transform the program into a vehicle that supports broadband in schools, the Federal Communications Commission this summer issued several new eRate rules.

One change requires the Universal Service Administrative Co. (USAC), the agency that administers the eRate, to post information about the services bought by applicants—as well as these line-item costs—on its website for the 2015 funding year and beyond.

To do this, USAC will work to standardize the information required in Block 5, Item 21 of the Form 471 eRate application.

Many service providers balked at this idea when it was first proposed, arguing that it could lead to unintended consequences—such as higher prices and less competition.

“Competition would suffer if vendors were allowed to see each other’s pricing,” eChalk wrote in comments to the FCC last year. Sprint suggested there was “a risk that publicly posting rate information could … facilitate price fixing or coordinated pricing.”

But the FCC was unmoved by these arguments. “Given the level of public scrutiny of the eRate program, we think price transparency will shine a light on any anti-competitive behavior,” it wrote in explaining its decision.

Keith Krueger, chief executive officer of the Consortium for School Networking, said the new transparency rule would eliminate the secrecy about pricing and should lead to better deals for eRate applicants.

“It’s been hard for schools to know if they’re getting a good deal on eRate-eligible services,” he said. “This will help drive questions of service providers, like: ‘Why were you able to give this district this price?’”

Some commenters had expressed concern that state laws, local regulations, or existing contracts might not allow for pricing disclosure. In response to these concerns, the FCC said applicants can opt out of this disclosure if they can demonstrate an explicit need.

Greater transparency wasn’t the only rule change intended to control costs. Other changes are designed to encourage better eRate pricing through master contracts and volume bidding.

(Next page: More details about these changes—as well as new rules designed to simplify the application process)

For instance, the FCC’s Wireline Competition Bureau was given the authority to designate “preferred master contracts” for Category 2 equipment—the routers, switches, wireless access points, and other equipment needed to bring broadband access into classrooms.

Schools and libraries wouldn’t have to file a Form 470 to request services included in these master contracts, although they would have to consider these services in their evaluation of eRate bids.

To encourage bulk purchasing, the FCC has changed its rules on consortium applications. Starting next year, the eRate forms will distinguish whether the leader of a consortium has the authority to make buying decisions for its member districts—or whether it only has the authority to seek competitive bids on behalf of members.

This change opens up membership in a purchasing consortium to schools that don’t want to hand over full buying power to another entity—while still letting them take advantage of volume pricing.

Simplifying the eRate application process

Besides aiming to reduce the cost of eRate-eligible services, the FCC has taken a number of steps to make it easier for schools and libraries to apply. For instance…

• To encourage more multiyear contracts and to expedite the review of these contracts, applicants will be required to fill out a complete Form 471 only once for these services, in the first year of the contract. After that, applicants will be able to submit a streamlined application for each remaining year.

The maximum length of a multiyear contract is five years, and applicants will not be able to receive multiyear funding commitments, the FCC said.

• Starting next year, applicants no longer will have to submit a technology plan to receive funding for Category 2 services. But just because you don’t have to file a technology plan doesn’t mean you shouldn’t have one, the FCC noted.

• Some low-cost purchases have been exempted from the FCC’s Form 470 posting and bidding requirements. In particular, if you’re spending $3,600 or less per building, per year, on the pre-discounted cost of internet access with at least 100 megabits per second of downstream bandwidth and 10 Mbps of upstream bandwidth, you don’t have to file a Form 470 and competitively bid this service.

• The FCC has relaxed its rules about signing a contract for eRate services before filing a Form 471. Acknowledging that it can be hard to get all the required signatures before the filing deadline, the agency has amended its rules to state that you need “a signed contract or other legally binding agreement in place” before filing a Form 471.

• Applicants will be allowed to invoice USAC directly for reimbursements on eRate-eligible services they pay for in full. Before, USAC would release funding only to service providers, which then would pass on the funding to schools—but this required a lot of coordination between applicants and their service providers.

The FCC has also added more stringent rules to guard against waste, fraud, and abuse. For example, eRate applicants must keep all documentation for 10 years instead of five, and they have to let USAC officials inspect any installations if requested.

See also:

A $5 billion bounty: How to use eRate support for Wi-Fi

New eRate rules invite a new approach: Managed Wi-Fi

eRate changes prompt new voice options for schools

School eMail, websites hit by eRate changes

New discount method could help—or hurt—eRate applicants

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Dennis Pierce

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