Telecom Carriers Want Easier E-Rate Process
A group of telecom carriers want to streamline the way e-rate discounts are given to schools and libraries, saying the system’s complexity can lead to errors. The carriers hesitated to answer questions on their proposal before knowing if groups representing schools and libraries endorse it. At least one such group, the State E-Rate Coordinators Alliance (SECA), has misgivings about the proposal.
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At issue is the complex process by which schools and libraries file for discounts on e-rate projects. Instead of making grants, the e-rate program gives discounts on service, based on financial need. “There are multiple forms, multiple checks,” said a representative of one carrier. “It is duplicative and ugly and we often find ourselves in the middle, in the role of banker.” For example, money intended to defray service costs doesn’t go directly to schools and libraries, but flows through contractors that distribute it to them, she said.
Telecom carriers, which often are e-rate contractors, have proposed giving e-rate money directly to schools and libraries rather involving contractors in the process. Schools or libraries participating in the program now get letters from the Universal Service Administrative Co. (USAC), approving a project and promising money. Depending on financial need, a project may qualify for a discount of as much as 90 percent, with the institution paying 10 percent and the federal e-rate program paying the rest.
FCC rules offer two ways to get the money, both requiring involvement by the contractor, known at USAC as the “service provider.” Each method involves multiple filings, carriers said. In one, the school or library pays the contractor in full, then is reimbursed by USAC through the contractor for the amount of its discount. In the other, the contractor bills the institution only for the school’s or library’s share of the cost, invoicing USAC for the rest. Institutions and their contractors can choose either method.
“Either way, the service provider is involved and has to file forms so the school gets its money,” said an official at a telecom company that didn’t want to be identified. Both approaches are “administratively complex, labor intensive” and error-prone, said the official, noting that there are “three levels of forms for any money to flow.”
AT&T in a Sept. 14 ex parte letter described a meeting on the proposal with members of the FCC Wireline Bureau. The letter noted participation by Verizon, Embarq, Sprint, Qwest, and AT&T. The ex parte outlined a plan for “fundamental change in the E-rate funding methodology” including direct distribution of money to schools and libraries via individual USAC-based “e-rate discount accounts” that applicants could use to buy e-rate services.
The proposal would keep the current application process. However, but once funding was approved, a school or library could draw on its e-rate account directly to pay service providers, rather than have to make additional filings or wait for money to funnel through a contractor. Among the benefits of this shift, the carriers said in the ex parte, is that it would “take service providers out of the USAC funding flow equation.” The ultimate goal, they said, was to “return the relationship between schools and libraries and service providers to normal commercial transaction.”
The carriers also met Dec. 14 with bureau officials, said another ex parte, noting that the group was “continuing to develop the concept” and hoped “to be able to share a more detailed proposal in early 2008.” The group is “continuing to work on making proposals more specific” and expects to talk to the FCC again, a carrier source said. Lack of involvement by schools and libraries seems to be a hurdle. Carriers have been talking with groups representing those sectors, they told the FCC in the latest ex parte.
The Education and Library Networks Coalition (EdLinC) is noncommittal. The group is studying the proposal but isn’t “prepared to provide any comments on it yet,” a spokesman said.
SECA doesn’t like the plan because it “puts all the burden on the school or library” to make sure a service is eligible for e-rate reimbursement, chairman Gary Rawson said. Schools and libraries often rely on technical expertise from telecom companies and other contractors, he said. A rural school district with no employees responsible for technology could “lose out” if it had to “assume total responsibility” for the details of e-rate eligibility, material to be filed on forms, and procedures to follow, Rawson said. “We want service providers to share the responsibility because they are more likely to be tech savvy,” he said, urging establishment of a middle ground.
The telecom carrier proposal stems from a June 2005 FCC proposed rulemaking in which the agency asked for suggestions for improving “the management, administration and oversight” of the Universal Service Fund and USAC (CD June 15/05). One goal of that inquiry is to simplify disbursement, billing and collection. A USAC spokesman said it doesn’t make the rules, but only enforces them. “We follow whatever policies the FCC puts in place,” he said.