Advocates Seek FCC Relief for E-Rate Applicants 'Confused' by USAC Form Change, Guidance

"The menu changes made last August" and "inconsistent and belated guidance provided by USAC over the remainder of the competitive bidding window created extensive confusion among the applicant community -- ourselves included," said an E-Rate Central filing Wednesday in docket 13-184: "This is a problem that needs to be solved now." The group, which is the E-rate coordinator for New York, said FCC relief is needed "to avoid penalizing applicants who, in good faith, tried to bid and apply for Internet access and transport services" in FY18. "Changes need to be made" to the menu before July 1 to avoid similar "confusion in the coming procurement/application cycle," it said.

Several hundred E-rate applicants "could be denied over this technicality," said John Windhausen, executive director of the Schools Health & Libraries Broadband (SHLB) Coalition, whose estimate was conservative compared to another. "This could be a nightmare situation for applicants and the FCC," Windhausen told us. A fix "is of preeminent importance to ensure FY 2018 applicants are not unjustly denied funding, and to make much-needed revisions to the FY 2019 Form 470 online application so the problem does not recur in the upcoming application cycle," said an SHLB filing Monday, which was backed by Ad-Tec.

The Ohio Information Technology Centers flagged the issue March 16. Since at least 2013, the group said, E-rate applicants seeking competitive provider bids for internet access service over any conduit could use a "Bundled Internet Access and Transport" category on their Form 470 filing. However, in August, "without any formal guidance or notice and comment period from the Commission," USAC told applicants they could no longer select that category for internet access bundled with fiber, but instead were to use "Lit Fiber Transport," said an Ohio ITCs filing on discussions with commissioner aides and Wireline Bureau staffers. It said the change "led to confusion," which continued even after further USAC guidance. The FCC has "repeatedly" said such USAC guidance is nonbinding, said the filing, which argued the prohibition on using “Bundled Internet Access and Transport” as a category for fiber options is "directly contrary to the express language of the Eligible services list" for FY18.

The bureau suggested parties could appeal denials, but that process is protracted and costly, the Ohio ITCs said. The group asked for the FCC to formally clarify the menu, allow applicants to amend Form 471 funding requests, and direct USAC to extend a March 22 Form 471 deadline.

The State E-Rate Coordinators Alliance opposed a Form 471 filing extension, though it agreed with the Ohio ITC concerns. An extension would simply delay funding commitment letters, which are "of paramount concern to many applicants that need to purchase and install new equipment and infrastructure as quickly as possible," said a March 19 SECA letter. "We believe that the best solution is for the FCC to instruct the E-rate administrator to not issue any funding denials where applicants attempted to comply in good faith with the Form 470 posting requirements for Internet service." SECA Chairman Gary Rawson told us applicants for bundled internet and fiber service should be held harmless if they made certain Form 470 category selections, including "Internet Access & Transport Bundled."

Other school and library groups backed the SECA letter, with several seeking a fix of the FY19 Form 470 before July 1. The deadline wasn't extended. There were 13,551 applicants that filed FY18 Form 470s for internet and data services, with 7,535 submitting (Form 471) funding requests referencing the Form 470s as of March 18, said Funds for Learning. It criticized continuing "problems with the E‐rate competitive bidding requirements for data and Internet services," blaming "inconsistent Form 470 guidance," "confusing" application requirements, and "punitive actions from the Administrator." The Ohio ITCs backed a "safe harbor for applicants who may have filed improperly due to the changes," emailed counsel Rebecca Jacobs Goldman of Womble Bond.

Education SuperHighway said the scope of the Form 470 problem is broad. It reviewed all FY18 Form 470s through Jan. 13 and "found that 19% of relevant Category 1 [broadband connectivity] applications were misfiled because of the issue," ESH said. "This may affect up to 2,300 applications if this issue is not addressed immediately." Many parties filed multiple Form 470s to address mistakes, said Rawson, who cited USAC training sessions as sometimes offering conflicting advice. But ESH State Engagement Manager Dan Runcie told us he believes most applicants filed just once, leaving the ones with mistakes unchanged.

Advocates are hopeful, but concerned. "The FCC is taking the issue seriously. We don't know how they're going to decide, but they're asking a lot of questions," Windhausen said. "We don't have any indication yet they're going to do anything different outside the regular appeal process," said Marijke Visser, American Library Association senior policy advocate. But appeals take time and resources that many applicants don't have, she said, and delays can jeopardize project funding and compliance with a June 30, 2019, FCC deployment deadline for FY18 projects.

E-Rate Central concurred "with SHLB's 'preferred approach' of reinstituting a single description of bundled Internet access and transport. As indicated in the Ohio ITCs’ original ex parte notice, reestablishing the historic description is the best way to avoid applicant confusion and uncertainty."

"Let this be a lesson learned" about changing procedures "midstream," Rawson said.