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Before the
FEDERAL COMMUNICATIONS COMMISSION
Washington, D.C. 20554
____________________________________
)
)
In the Matter of )
) CC Docket No. 02-6
Schools and Libraries Universal Service )
Support Mechanism )
)
____________________________________)
COMMENTS OF THE EDUCATION AND LIBRARY NETWORKS COALITION
Matthew C. Ames
Holly L. Saurer
Miller & Van Eaton, P.L.L.C.
Suite 1000
1155 Connecticut Avenue, N.W.
Washington, D.C. 20036
(202) 785-0600
Attorneys for the Education and
Library Network Coalition
April 5, 2002
SUMMARY
The Education and Library Networks Coalition ("EdLiNC")
respectfully submits these comments in response to the Commission's
Notice of Proposed Rulemaking in CC Docket No. 02-6 (the "NPRM").
EdLiNC was formed to represent the viewpoint of public and private
schools and libraries in the FCC proceedings concerning the implementation
of the Telecommunications Act of 1996. The Coalition seeks to expand
the use of educational technology and ensure that schools and libraries
are aware and take advantage of the affordable rate, which is guaranteed
to them in the Universal Service provisions of the Act. EdLiNC is
a volunteer-based organization. Those members who are participating
in this filing are identified at Exhibit A.
The EdLiNC community is encouraged by the Commission's decision
to address the issues outlined in the NPRM, because the discounts
for schools and libraries established by the Commission pursuant
to Section 254(h) of the Communications Act (the "E-Rate"
or "E-Rate discounts") have proven to be an enormous benefit
to America's schools and libraries. After five years, however, it
is important that the Commission re-examine its rules to ensure
that the original purpose and the full promise of Section 254(h)
are being met.
The success of the universal service discounts for schools and libraries
can be measured by the level of requests. The need for eligible
services for fiscal year 2003 is estimated at $5.7 billion, well
over twice the $2.25 billion cap imposed by the Commission. This
success and showing of need proves that the Commission should not
just maintain the E-Rate Discounts as they are constituted, but
find equitable ways to strengthen and expand them.
Unused funds should be rolled over to the current funding year.
EdLiNC strongly agrees with Commissioner Copps's statement that
unused funds should be rolled over to the current funding year.
Not only has this always been the general understanding of what
the rule was intended to accomplish, but there is no real ambiguity
in the rule, and in any event it makes no sense to effectively reduce
the funding commitment when demand for discounts is more than double
the Commission's cap. Rolling over unused funds to the current year
could actually be used to help fund successful appeals, thus addressing
another of the Commission's concerns.
EdLiNC opposes discounts for Internet access bundled with content.
The NPRM asks for comments regarding when, if ever, discounts should
be allowed for Internet access bundled with content. EdLiNC believes
that the fundamental purpose of the E-Rate program is to fund telecommunications
services, not content. Therefore, discounts for bundled Internet
content should never be permitted. EdLiNC does support the FCC's
current mechanism, however, which allows discounts on the telecommunications
portion of a bundled offering under certain circumstances.
EdLiNC seeks changes that support the educational purposes of the
program. The NPRM contains a number of proposals which offer the
possibility of strengthening the educational purposes of the E-Rate
program. EdLiNC believes that any change to the E-Rate should support
those purposes, and that this goal should be the primary focus of
any charges. Specifically:
· EdLiNC supports including wireless services and voice
mail used for educational purposes in the definition of eligible
services.
· EdLiNC supports restrictions on transferability of equipment,
but believes that any rule must be flexible enough to allow for
bona fide need.
· EdLiNC believes a bar or suspension for willful or repeated
noncompliance would support the educational purposes of the program.
Such a restriction should apply to providers as well as to applicants,
and should be carefully crafted to apply only in the case of repeated
and willful failure to comply with material provisions of the FCC's
rules. Minor or inadvertent errors should not be used as an excuse
to cut off participation, and the actions of paid consultants should
not be imputed to their clients.
· Applicants should have the choice of paying the full cost
of the service to the provider and being reimbursed by the Administrator,
and paying only the discount price, leaving it to the provider to
obtain the balance from the Administrator. Providers should not
be allowed to dictate this decision.
In conclusion, the E-Rate discounts have undeniably provided much-needed
assistance to schools and libraries around the country. EdLiNC applauds
the Commission for its dedication to the careful implementation
of Section 254(h) and its willingness to make further improvements.
EdLiNC supports the Commission's efforts to improve the program,
and urges the Commission to avoid changes that would impose unnecessary,
ineffective, or duplicative regulation on schools and libraries.
TABLE OF CONTENTS
SUMMARY i
INTRODUCTION 1
I. THE E-Rate DISCOUNTS HAVE PROVEN THEIR VALUE TO
AMERICA'S SCHOOLS AND LIBRARIES. 1
II. THE FCC MUST NOT TAKE ANY STEPS THAT WOULD
THREATEN THE OVERALL INTEGRITY OF THE E-Rate. 3
A. FUNDS THAT ARE ALLOCATED IN ONE YEAR BUT NOT DISBURSED
SHOULD BE ROLLED OVER AND MADE AVAILABLE TO APPLICANTS
THE CURRENT FUNDING YEAR. 3
B. EDLINC OPPOSES DISCOUNTS FOR INTERNET ACCESS BUNDLED
WITH CONTENT. 6
III. EDLINC SUPPORTS CHANGES TO THE FCC'S RULES THAT
WILL STRENGTHEN THE EDUCATIONAL PURPOSES OF THE
E-Rate DISCOUNTS. 7
A. THE COMMISSION SHOULD MAKE WIRELESS SERVICES AND
VOICEMAIL ELIGIBLE FOR E-Rate DISCOUNTS. 7
B. EDLINC SUPPORTS THE USE OF AN APPROVED LIST OF SERVICES
WITH RESPECT TO CERTAIN BASIC AND COMMONLY-USED SERVICES. 8
C. EDLINC SUPPORTS THE CURRENT RATIO RESTRICTIONS FOR
REVIEW OF REQUESTS CONTAINING INELIGIBLE SERVICES. 11
D. EDLINC SUPPORTS THE PROPOSED RESTRICTIONS ON TRANSFERS
OF EQUIPMENT, PROVIDED THAT EXCEPTIONS ARE PERMITTED
FOR CASES OF DEMONSTRABLE NEED. 12
IV. EDLINC SUPPORTS ADDITIONAL MEASURES FOR ENCOURAGING COMPLIANCE
WITH THE FCC'S RULES, PROVIDED THAT SUCH
MEASURES ARE FAIR AND BALANCED 13
A. FAIRLY CONDUCTED AND PROPERLY FUNDED INDEPENDENT
AUDITS WOULD ENHANCE PROGRAM INTEGRITY, BUT AN AUDIT
REQUIREMENT SHOULD TAKE INTO ACCOUNT ESTABLISHED AUDIT REQUIREMENTS.
13
B. SUBJECT TO REASONABLE SAFEGUARDS, THE PROPOSED BAR FOR
WILLFUL OR REPEATED NONCOMPLIANCE WOULD INCREASE PROGRAM INTEGRITY.
15
V. EDLINC SUPPORTS RULES THAT STREAMLINE THE APPEALS
PROCEDURE. 16
VI. EDLINC SUPPORTS APPLICANT CHOICE REGARDING PAYMENT
METHODS. 17
CONCLUSION 18
INTRODUCTION
The Education and Library Networks Coalition ("EdLiNC")
respectfully submits these comments in response to the Commission's
Notice of Proposed Rulemaking and Order in CC Docket No. 02?6 (the
"NPRM"). EdLiNC was formed to represent the viewpoint
of public and private schools and libraries in the FCC proceedings
concerning the implementation of the Telecommunications Act of 1996.
The Coalition seeks to expand the use of educational technology
and ensure that schools and libraries are aware and take advantage
of the affordable rate, which is guaranteed to them in the Universal
Service provisions of the Act. EdLiNC is a volunteer-based organization.
Those members who are participating in this filing are identified
at Exhibit A.
EdLiNC and its members are encouraged by the Commission's decision
to address the issues outlined in the NPRM, because the discounts
for schools and libraries established by the Commission pursuant
to Section 254(h) of the Communications Act (the "E-Rate"
or "E-Rate discounts") have proven to be an enormous benefit
to America's libraries. After five years, however, it is important
that the Commission re-examine its rules to ensure that the original
purpose and the full promise of Section 254(h) are being met.
I. THE E-Rate DISCOUNTS HAVE PROVEN THEIR VALUE TO AMERICA'S
SCHOOLS AND LIBRARIES.
In adopting the universal service provisions of the 1996 Telecommunications
Act, Congress acknowledged the importance of providing the nation's
schools and libraries with modern telecommunications technology.
The Conference Report on S. 652 stated, clearly and directly, the
intent of Congress regarding universal service for schools and libraries:
The ability of K-12 classrooms, libraries and rural health care
providers to obtain access to advanced telecommunications services
is critical to ensuring that these services are available on a universal
basis. The provisions of subsection (h) will help open new worlds
of knowledge, learning and education to all Americans - rich and
poor, rural and urban. They are intended, for example, to provide
the ability to browse library collections, review the collections
of museums, or find new information on the treatment of an illness,
to Americans everywhere via schools and libraries. This universal
access will ensure that no one is barred from benefiting from the
power of the Information Age . . . .
H.R. Conf. Rep. 458, 104th Cong., 2d Sess. ("Conf. Rep.")
at 132-133 (1996).
In the First Report and Order, In re Federal-State Joint Board on
Universal Service, Report and Order, 12 FCC Rcd 8776, 44-55 (1997)
("First Order"), the Commission established the general
principles of the Universal Service program, including competitive
and technological neutrality. The First Order also established the
groundwork for the schools and libraries program, outlining the
program's eligible services, discount methodology, funding mechanisms,
and access to advanced communications. See generally First Order,
Section X.
Of particular importance to schools and libraries was the Fourth
Order, In re Federal-State Joint Board on Universal Service, Fourth
Order in Reconsideration, 13 FCC Rcd. 5318 (1997)("Fourth Order").
This Order looked at many issues, including concerns regarding the
administrative burden of the reporting requirements, the ineligibility
of state telecommunication networks and wide area networks, the
restrictions on eligibility for internal connections, competitive
bid requirements, and reimbursements. See generally Fourth Order
at Section VI.
The NPRM revisits many of these issues, while also addressing new
concerns. In attempting to improve the program, the Commission must
remember the fundamental purpose of the E-Rate discounts and ensure
that other considerations do not inadvertently undermine the intent
of Congress.
As technology has evolved in the five years since the Commission
adopted the First Order, so have schools and libraries. With the
help of the E-Rate, schools and libraries are now fully immersed
in technology, and their operations and capabilities are changing
dramatically. For example, the Delta View Joint Union School District
in Hanford, California is a K-8 public school with just 89 students.
The school is located in a very rural part of California, and accrues
major expenses to get advanced technology for their classrooms.
However, this district, solely through the help of E-Rate funding
in Years 3, 4, and 5, has established an Internet connection in
every one of its classrooms. To Delta View, E-Rate is considered
"the great equalizer," enabling affordable Internet connections
and service in an area where non-discount prices are very high.
II. THE FCC MUST NOT TAKE ANY STEPS THAT WOULD THREATEN THE OVERALL
INTEGRITY OF THE E-Rate.
EdLiNC would like to stress the necessity of ensuring the E-Rate
program's integrity. The NPRM raises two issues that go to the core
of the program's integrity. The proposals for treatment of unused
funds, and the discounts for Internet access bundled with content,
both raise the possibility that authorized funding will not be made
available for its intended purpose, the first through reductions
in the amount of such funding, the second through diversion of funding
to inappropriate areas.
A. FUNDS THAT ARE ALLOCATED IN ONE
YEAR BUT NOT DISBURSED SHOULD BE ROLLED OVER AND MADE AVAILABLE
TO APPLICANTS THE CURRENT FUNDING YEAR.
Section III.E.3, 69-70, of the NPRM seeks comment on how unused
funds should be treated. The current rule states that "all
funding authority" that is not used in one year shall be carried
over to the current funding year. 47 C.F.R. § 54.501(a). The
NPRM notes, however, that the rule is silent about treatment of
unused funds. The NPRM suggests modifying this rule to either: (1)
require that unused funds be credited back to contributors through
reductions in the contribution factor; or (2) require the distribution
of unused funds in subsequent years, in excess of the annual cap.
EdLiNC strongly believes that unused funds should be rolled over
to the current funding year. EdLiNC supports Commissioner Copps's
statement that there should be no ambiguity regarding this issue,
and that the rules clearly indicate that such treatment is permissible.
Despite any apparent ambiguity in the rule, this has always been
EdLiNC's understanding of the rule. In fact, the reference to "funding
authority" was clearly understood at the time to refer to the
actual funds; the section is meaningless otherwise. A plain reading
of the regulation supports Commissioner Copps's statement.
In addition, prior proceedings support the concept of rolling over
funds. When the Commission adopted the Joint Board's recommendation
that funding be capped at $2.25 billion per year, the Commission
also decided that if not all the funds were needed in the first
year, unused funds could be rolled into the current funding year:
"We also adopt the Joint Board's determination that, if the
annual cap is not reached due to limited demand from eligible schools
and libraries, the unspent funds will be available to support discounts
for schools and libraries in subsequent years." No discussion
of section 54.507 in the Commission's proceedings support the interpretation
and distinctions presented in this NPRM. Nowhere is there a distinction
made between funds and funding authority, or the disparate treatment
of committed and uncommitted funds, and there is no reason for the
Commission to read that distinction into this or any other proceeding.
Section III.E.2, 67-68, of the NPRM points out that each year, a
portion of the program funding is not used. While all funds are
committed, the documentation is not always received in order to
disburse all these funds to the successful applicants. In the first
year, 82% of funds were disbursed, while in the second year this
dropped to 71%. The NPRM seeks comment on program changes that can
increase the percentage of committed funds being disbursed, and
also seeks to develop a list of the reasons why applicants do not
seek to receive all of their committed funding.
EdLiNC believes that any funds that are not used in one year should
be rolled over and used in the current funding year in lieu of crediting
these funds back to contributors. This is the easiest and most equitable
way of ensuring that funds are used to provide services. Clearly,
the demand for these funds exists. If anything, the Commission should
consider raising the cap due to increased demands on the program.
This issue strikes us a red herring: an excuse to indirectly lower
the $2.25 billion cap, even though the SLD's own demand estimate
demonstrates very high need for E-Rate funding.
In any event, unused funds by no means reflect a decrease in need.
Due to the lengthy application process, it is inevitable that not
all committed funds will be disbursed. Many things can happen between
the time of application and the time of disbursement. For instance,
charges for services can decrease, or providers can go bankrupt.
In addition, projected budgets might be cut, or proposed spending
or construction based on bond referendums may not pass.
It is unlikely that the reasons that cause funds to go unused will
disappear. As such, the program should accept that these variables
exist, and ensure that funds are rolled over to the following year
and used to help as many schools and libraries as possible. The
discrepancy between the amount authorized and the amount disbursed
should by no means be used as an excuse to reduce the amount of
funding collected or distributed.
B. EDLINC OPPOSES DISCOUNTS FOR INTERNET
ACCESS BUNDLED WITH CONTENT.
In section III.A.2, 23-25, of the NPRM, the Commission asks whether
an applicant should receive discounts on the entire price of an
Internet access service that includes a bundled content component,
if that service is the most cost-effective service package available.
EdLiNC opposes the use of any E-Rate support to pay for content
of any kind.
E-Rate discounts should not be used to fund the purchase of content
because the purpose of the E-Rate is to support and promote the
extension of the nation's communications networks into schools and
libraries. If the Commission were to allow full support for bundled
services, the limited funds available to support telecommunications
services and other permissible means of extending the existing network
would be stretched even thinner. This reasoning was sound when adopted
in the First Report and Order, and it is even more sound today,
when the demand for discounts on all kinds of services has increased
significantly. Allowing discounts for access bundled with content
creates a precedent for providing discounts for non-telecommunications
services. This could lead to E-Rate support for a whole host of
other worthwhile services, like professional development and hardware.
These non-telecommunications services are important, but they are
not within the realm of services that the E-Rate program was intended
to support. In addition, allowing discounts on bundled service may
encourage providers to insist on bundling service and refusing to
provide unbundled service.
EdLiNC does support the Commission's current mechanism, implemented
in the First Order at 447, where it made provisions for applicants
who found that it is more cost-effective to purchase bundled Internet
access. This mechanism provides a workable system for schools and
libraries who do not have an unbundled option, or can receive substantial
savings by purchasing bundled services. The current mechanism also
ensures that applicants are not receiving discounts for content,
while still providing them flexibility.
III. EDLINC SUPPORTS CHANGES TO THE FCC'S RULES THAT WILL STRENGTHEN
THE EDUCATIONAL PURPOSES OF THE E-Rate DISCOUNTS.
EdLiNC believes that any changes made to the E-Rate must advance
the E-Rate's educational purpose. While administrative efficiency
is important, the goal of providing as many services as possible
to schools and libraries is paramount. As such, EdLiNC supports
adding eligible services, creating a flexible list of pre-approved
services, maintaining the 30% benchmark, creating limited equipment
transferability limits, and allowing payment method flexibility.
Each of these options will help maintain the educational purposes
of the program, and may provide the added benefits of easing administrative
concerns and increasing overall efficiency.
A. THE COMMISSION SHOULD MAKE WIRELESS
SERVICES AND VOICEMAIL ELIGIBLE FOR E-Rate DISCOUNTS.
In Section III.A.1, 15 - 22, the NPRM seeks comment regarding the
definition of eligible services. Specifically, the NPRM asks whether
Wide Area Networks, wireless services, and voice mail should be
eligible for discounts.
Wireless services and voicemail should be included in the definition
of eligible services for educational purposes only. The Commission
has broad authority to determine the scope of eligible services.
Section 254(h)(2) directs the Commission "to enhance, to the
extent technically feasible and economically reasonable, access
to advanced telecommunications and information services for all
public and nonprofit elementary and secondary school classrooms,
health care providers, and libraries." These services are increasingly
common-place in today's technological society, but most importantly
they are fundamentally telecommunications services: there is no
logical argument for excluding them, particularly since e-mail is
eligible for discounts.
Including wireless services also is consistent with the one of the
stated goals of universal service, namely, technological neutrality.
See First Report and Order, 49. As such, EdLiNC believes that wireless
services that are the functional equivalent of wireline services
should be included as eligible services.
B. EDLINC SUPPORTS THE USE OF AN APPROVED
LIST OF SERVICES WITH RESPECT TO CERTAIN BASIC AND COMMONLY-USED
SERVICES.
Section III.A.1, 13-14, of the NPRM suggests establishing an online
database of pre-approved products and services in order to improve
the operation of the eligibility determination process. Currently,
the SLD posts on its website a list of products and services, with
their corresponding eligibility. This approach gives applicants
some guidance regarding whether a requested service is eligible,
but simply because an item appears on the list does not mean an
application will be approved. This creates uncertainty for applicants,
which in turn makes planning and budgeting more difficult. In addition,
while applicants are asked for a great deal of information, it appears
that much of this information is not considered in the approval
process, particularly for more routine or typical applicants. On
the other hand, the potential for a case-by-case review allows applicants
to explain to the SLD why their specific application is eligible,
which is especially important when processing applications for new
or innovative services.
EdLiNC supports the use of a list of eligible products and services,
provided that the list is prepared and used correctly, and the application
process still allows for innovation and flexibility. If implemented
incorrectly, relying on an eligible services list could stifle innovation.
We believe that the SLD has substantial experience at this point
in determining what kinds of services are most commonly requested
by applicants and most commonly approved for discounts. Accordingly,
we believe it should be possible to establish a list of approved
services, which could be subject to minimal review by the SLD staff.
These services should be those about whose eligibility there is
no debate; we believe that all services that involve the simple
transmission of telecommunications, as well as Internet access that
is provided on an entirely unbundled basis, should qualify for discounts
and should be approved using a streamlined application process.
In general, the application process should be based on four principles:
transparency, consistency, flexibility and generality. First, all
funding decisions should be transparent, so that all applicants
can learn from the experiences of others. Applicants should have
access to the same eligibility criteria as the application reviewers
have. Second, all decisions should be based on consistently and
logically applied principles, so that applicants can understand
and learn from the rationale supporting a decision to deny or extend
discounts to a particular service. Third, decisions should not be
narrowly tied to what has been approved in the past, but should
be open to the eligibility of new services that otherwise meet the
FCC's criteria for eligibility. This will allow new technologies
and new services to be treated equitably. Finally, decisions must
be justified on the basis of general characteristics, rather than
simply stating that a specific service or item of equipment is eligible.
Too often the current approach gives no guidance to future applicants
who may be considering applying for discounts for a wide range of
equipment and services. This is consistent with the one of the stated
goals of universal service, namely, technological neutrality. See
First Report and Order, 49.
Consistent with these principles, if a service is on the list, there
should be no doubt about its eligibility. Conversely, there must
also be mechanisms for expanding the list and for funding innovative
applications. EdLiNC recommends that a "Checklist of Eligible
Services" be added to the online application and that there
be an "Other Eligible Service" option made available at
the end of the checklist, which applicants could use to identify
services or equipment that they are requesting but that are on the
eligible services checklist. This option would allow applicants
to request discounts for products or services that do not appear
on the eligible services checklist. At the same time, this option
would also provide an efficient mechanism for the Administrator
to learn of new products and services that should be considered
for inclusion.
An applicant using this option would need to understand that inclusion
of products or services in this category does not imply eligibility
and that eligibility of the product or service will be dependent
upon SLD review, which may delay application approval. Some sort
of explanation on the form or accompanying instructions would be
needed, to make this clear. Through this mechanism, we believe that:
(1) new products and services can be continually brought to the
attention of the SLD; (2) once a determination has been made by
the SLD, subsequent applications including the same product or service
can be easily and quickly approved or denied; and (3) the need for
periodic Notices of Inquiry, in order to determine new eligible
products or services, can be avoided. Another way to allow for expansion
of the list might be to require the FCC staff, such as the Office
of Engineering and Technology, perhaps, to periodically review the
types of services available in the marketplace and to update the
basic service list accordingly.
EdLiNC suggests that basic, commonly-used services that involve
the provision of transmission services or connections to external
networks should appear on such a pre-approved, published list, and
that the application process for these services should be streamlined.
If an applicant is making a request for an approved transmission
and connectivity service such as local telephone service, it should
be provided a pared-down application form that will save both the
applicant and the reviewer substantial resources. Another potential
improvement to the application process would be to establish a simplified
procedure for applicants reapplying for previously approved listed
services. The importance of ease of application, especially for
small entities, cannot be stressed enough.
In order to further streamline the process, there should also be
a mechanism for adding new services to the pre-approved list before
applications are due. Such a mechanism would allow an applicant
or a provider to nominate a service for eligibility prior to the
application process. The SLD, with the help of the FCC technology
staff, could determine if the service should be added to the list
before the applicant requests it. This would lessen the burden of
the appeals process for both the applicant and the program because
rather than being turned down after applying, and perhaps after
committing other resources towards the purchase of a service, an
applicant would know that the request would not be approved even
before it formally applied.
C. EDLINC SUPPORTS THE CURRENT RATIO
RESTRICTIONS FOR REVIEW OF REQUESTS CONTAINING INELIGIBLE SERVICES.
Section III.A.3, 26-27, of the NPRM discusses the review process
for requests containing ineligible services. Currently, the Administrator
only reviews funding requests where 70% or more of the services
requested are considered eligible services. If 30% or more of the
services are ineligible, the funding request is denied in its entirety.
The NPRM seeks comment on the benefits and burdens of this procedure.
EdLiNC understands the administrative efficiency of this practice,
and as such does not object to maintaining this rule. Yet, we recommend
that a statement be added to the online application which alerts
applicants to this rule and strongly encourages applicants to request
bidders to break out E-Rate eligible costs from E-Rate ineligible
costs during the bidding process, thus relieving school and library
applicants of this burden. SLD oversight of eligibility compliance
will still be required, but the potential for ineligible products
or services exceeding 30% of the total should be greatly diminished.
D. EDLINC SUPPORTS THE PROPOSED RESTRICTIONS
ON TRANSFERS OF EQUIPMENT, PROVIDED THAT EXCEPTIONS ARE PERMITTED
FOR CASES OF DEMONSTRABLE NEED.
Section III.B.2, 37-40, of the NPRM points out a potential loophole
in the eligibility rules. While discounted services cannot be sold,
resold, or transferred, there is nothing to stop an eligible entity
from transferring equipment purchased with the benefit of E-Rate
discounts between locations within a district, and requesting the
same services and equipment in the next year.
In principle, EdLiNC is sympathetic to this concern, as such a practice
might constitute an evasion of the FCC's rules, and would certainly
reduce the amount of funding available for other eligible entities.
Although it is not clear that this practice is actually a problem,
because there is no data available to establish the frequency of
such activity, EdLiNC does support closing such loopholes. Given
the rate of technical obsolescence, a two- or three-year moratorium
on transferring equipment would seem sufficient to curb this problem.
Yet, any such change should provide flexibility for those entities
that have a bona fide need and are not trying to take advantage
of the loophole. For example, such a rule would have to provide
for such exceptions as destruction by fire, flood, or similar catastrophe,
or because of a malfunction of the equipment itself that requires
replacement.
IV. EDLINC SUPPORTS ADDITIONAL MEASURES FOR ENCOURAGING COMPLIANCE
WITH THE FCC'S RULES, PROVIDED THAT SUCH MEASURES ARE FAIR AND BALANCED
EdLiNC agrees with the Commission desire to reduce "waste,
fraud and abuse," and can support measures to advance that
goal. But such measures as barring noncompliant entities from the
program must be carefully considered and applied only in cases of
clear and deliberate noncompliance. Reduction of "waste, fraud
and abuse" should not be misused as a means of limiting the
scope and value of the E-Rate.
A. FAIRLY CONDUCTED AND PROPERLY FUNDED
INDEPENDENT AUDITS WOULD ENHANCE PROGRAM INTEGRITY, BUT AN AUDIT
REQUIREMENT SHOULD TAKE INTO ACCOUNT ESTABLISHED AUDIT REQUIREMENTS.
Section III.D.1, 58-59, of the NPRM seeks comment on whether the
Administrator should be authorized to require independent audits
of recipients and service providers, if the Administrator has reason
to suspect that serious problems exist. These audits would be conducted
at the expense of the audited entities. EdLiNC strongly supports
reasonable accountability measures, but requiring audited entities
- particularly those found innocent of any error or wrongdoing -
to pay for audits is entirely unreasonable.
Under § 54.705(a)(1) of the Commission's rules, the SLD already
has the authority to audit the beneficiaries of this program. We
see no need for additional authority to be granted, particularly
because there is no evidence of any significant problem with the
current system that would be resolved through the use of audits.
On the other hand, because of the complexity of the E-Rate application
process and the diversity of eligible services and equipment, there
is a high probability of inadvertent errors and improper, but well-intentioned,
practices on the part of E-Rate applicants. Therefore, while we
can understand that if the Administrator became aware of potentially
serious problems or suspected malfeasance on the part of applicants
or service providers, the Administrator would want to conduct an
independent audit, it is far more likely that errors will be minor
and unintentional.
Consequently, we do not believe regular, unwarranted audits are
necessary or appropriate. Schools and libraries are already audited
as a matter of course. As government entities, schools and libraries
must account for the source and distribution of all funds they receive
on at least an annual basis. Accordingly, any audit scheme should
take into account a community's existing audit mechanism. Any audit
requirements must be very clear about what documents need to be
retained by applicants. In addition, audits should only be conducted
in the most serious of circumstances, and the Commission should
establish what these circumstances would be.
EdLiNC cannot support the proposed funding mechanism, especially
since there is no evidence of any significant problem regarding
how schools and libraries use Universal Service funding. After all,
applications are received and approved by the SLD, and funds are
not spent directly by the applicant - all the applicant receives
is a discounted rate on services. Consequently, there is little
opportunity for abuse of the program. In addition, an audit requirement
would deter schools and libraries from applying for discounts, particularly
the smaller and poorer entities who most need the discounts. Instead
of receiving much needed discounts, an inexperienced or inexpert
applicant could end up paying more for an audit than it received
in discounts. This kind of chilling effect would seriously harm
the program and goes entirely against the goals of Section 254(h).
A much fairer and more reasonable option would be to pay for audits
out of the universal service fund, or only require an applicant
to pay for the audit if the applicant is found to have knowingly
violated the program rules.
B. SUBJECT TO REASONABLE SAFEGUARDS,
THE PROPOSED BAR FOR WILLFUL OR REPEATED NONCOMPLIANCE WOULD INCREASE
PROGRAM INTEGRITY.
As noted in Section III.D.2, 60-62 of the NPRM, the Commission can
bring forfeiture proceedings against entities who willfully or knowingly
fail to comply with a material provision the FCC's rules. The rules,
however, do not permit the Commission to suspend or entirely bar
entities from participating in the program.
EdLiNC would support a temporary bar or suspension in the most egregious
cases, provided that the standard is not so strict as to punish
inadvertent or harmless errors. In addition, any such temporary
bar or suspension should apply equally to providers, consultants,
and applicants. For example, providers who collect funds in excess
of the amounts properly due for services provided should be sanctioned
at least as severely as schools and libraries. After all, telecommunications
providers have large staffs for dealing with such matters as processing
E-Rate related documents and they are in day-to-day contact with
the SLD and the Administrator. Most schools and libraries - especially
smaller ones - are not nearly as knowledgeable about the FCC's rules
or the SLD's procedures because they handle only their own requests,
compared to the hundreds of thousands of transactions a provider's
staff will process in a single year.
EdLiNC believes that any bar or suspension should be limited to
cases of material noncompliance, and any such rule must include
a right of appeal to the Commission. EdLiNC also believes that any
such rule should not hurt schools and libraries that have detrimentally
relied on the advice of paid consultants. In these instances, it
is the consultant that should be barred or suspended.
V. EDLINC SUPPORTS RULES THAT STREAMLINE
THE APPEALS PROCEDURE.
Section III.C.1, 48-52, of the NPRM addresses the current appeals
procedure. 47 C.F.R. § 54.702(a) requires that an appeal of
a decision by the SLD be received at the Commission within 30 days
of the decision. Because of recent disruptions in mail service,
that period has been extended to 60 days. As noted in the NPRM,
approximately 22% of all appeals are dismissed for being late-filed.
The NPRM seeks comment on extending the 30-day limit, and tying
the due date to the date an appeal is post-marked rather than mailed.
EdLiNC strongly believes that a longer time is needed for appeal.
We recommend making the temporary 60-day time-frame a permanent
change. Due to the myriad of staffing situations in the nation's
schools and libraries, it is unreasonable to expect these entities
to receive a decision, review the decision, mount an argument against
denial, obtain the necessary documentation for an appeal, draft
an appeal, and get it to the Commission within 30 days. As the statistics
clearly show, 30 days is not sufficient.
In addition, EdLiNC supports a rule that ties the due date to the
post-marked date. While this departs from general Commission practice,
it is consistent with other aspects of the SLD's practices. Further,
it is more equitable to isolated communities that may need to build
in extra mail time, or use much-needed funds to pay for an express
shipping service that guarantees delivery.
On a related matter, EdLiNC would like to applaud the Commission
for reducing the backlog of appeals. Appeals of funding decisions
can greatly affect the applicant's ability to budget for and provide
services each year. As such, the Commission's efforts to respond
in a timely fashion to the appeals of schools and libraries is to
be commended.
VI. EDLINC SUPPORTS APPLICANT CHOICE
REGARDING PAYMENT METHODS.
In Section III.B.1, 33-34, the NPRM discusses whether service providers
should be required to give applicants a choice regarding payment
methods. Existing practice provides for two payment methods: Either
the applicant pays the provider the full cost, and receives reimbursement
for discounted services from the service provider after it has received
reimbursement from the Administrator through the BEAR plan, or the
applicant pays only the non-discounted portion, and the provider
seeks reimbursement for the discounted portion. Some providers,
however, have insisted on receiving full payment from the eligible
entity as a condition of providing service. The rules do not specify
that service providers cannot insist on one form of payment over
another.
EdLiNC supports applicant choice in payment methods. Schools and
libraries are governmental entities, and generally must conform
to very specific budgetary and funding processes. The preferred
payment method may depend on the specific funding and budget practices
in a locality. It would be helpful if the rules accounted for such
differences, and gave schools and libraries the option to choose
a payment method that best fit local practices. Accordingly, we
support the proposal to prevent service providers from attempting
to impose a payment method on an applicant.
EdLiNC also supports maintaining an exception to this rule for smaller
providers who do not have the flexibility of more established providers.
As such, participating service providers should, as part of the
SPIN application process, be required to alert SLD as to whether
they will discount services on bills, provide reimbursement through
the BEAR process, or provide the option of either method to the
E-Rate applicant. This information should be provided on the SLD
website and made available to applicants during the Form 470 filing
process. As part of filing Form 486, applicants should identify
the process or options provided by the service provider for discounted
payment or reimbursement and indicate the process they elect to
use. This will have several positive effects: (1) It will eliminate
the need for contact between service providers and applicants to
determine the process chosen by the applicant; (2) it will encourage,
but not require, service providers to make both options available
to applicants, in that service providers NOT allowing the option
will be at a perceived disadvantage in the marketplace; (3) it will
allow applicants to select bids with prior knowledge of the reimbursement
or payment options allowed by the bidding service provider; and
(4) it will place the fewest constraints on both applicants and
service providers.
CONCLUSION
The E-Rate discounts have undeniably provided much-needed assistance
to schools and libraries around the country. EdLiNC applauds the
Commission for its dedication to the careful implementation of Section
254(h) and its willingness to make further improvements. EdLiNC
supports the Commission's efforts to improve the program, and urges
the Commission to avoid changes that would impose unnecessary, ineffective,
or duplicative regulation on schools and
libraries. Finally, EdLiNC respectfully requests that the Commission
consider additional changes needed to ensure the equitable and efficient
allocation of funds.
Respectfully submitted,
Matthew C. Ames
Holly L. Saurer
Miller & Van Eaton, P.L.L.C.
Suite 1000
1155 Connecticut Avenue, N.W.
Washington, D.C. 20036-4306
202-785-0600
Attorneys for the Education and
Library Network Coalition
April 5, 2002
7496\05\HLS00381.DOC
Exhibit A
The Members of EdLiNC Participating in this Filing:
American Association of School Administrators
American Library Association
Association of Educational Service Agencies
Consortium for School Networking
International Society for Technology in Education
National Association of Independent Schools
National Catholic Education Association
National Education Association
National Education Knowledge Industry Association
National Rural Education Association
National School Boards Association
Rural Schools and Community Trust
United States Conference of Catholic Bishops
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