1. E-rate Survival 2011: The New, The Old The Good, The Bad
Presented by:
Julie Tritt Schell
Pennsylvania E-rate Coordinator
February 2011

2. Agenda Changes in 6th Order New SPIN Change Rules New Gift Rules
Changes to Eligible Services
Anticipated Filtering Rules
BREAK
Audits/PQA Initiative
New Forms 470 and 471

3. 6th Report and Order FCC released Order September 28
Biggest changes to E-rate since program began in 1998
Future Order may address:
Revision to the definition of Rural
Changes to the discount calculation methodology
Changes to the manner in which P2 funding is distributed
Next NPRM will not be issued in Spring as previously expected
Let’s Review 6th Order major changes…

4. New SPIN Change Rules
Beginning with FY 2011: “An applicant may not change to a different service provider for a particular funding year after a service provider has been selected through the competitive bidding process unless (1) there is a legitimate reason to change providers (e.g., breach of contract or the service provider is unable to perform); and (2) the newly selected service provider received the next highest point value in the original bid evaluation, assuming there was more than one bidder.”

5. New SPIN Change Rules Why? What does this mean?
Some vendors were abusing lax SPIN change rules and not bothering to participate in 470 bidding process
What does this mean?
Can no longer switch vendors because of lower price
Must select vendor that received the next highest point value in the original bid evaluation, assuming there was more than one bidder
If only one original bidder, an applicant may select a substitute service provider that satisfies its needs most effectively and efficiently
An applicant will not be required to initiate another competitive bidding process by submitting a new Form 470
Split FRNs when transitioning to new service is acceptable
Can submit new 470 in mid-year if you want to switch for any other reason or want to sign new multi-year contract

6. Gift Restrictions Effective January 2, 1011
All gifts from service providers to applicants are prohibited except for:
(1) Modest refreshments that are not offered as part of meal (e.g., coffee and donuts provided at a meeting) and items with little intrinsic value intended for presentation (e.g., certificates and plaques); and
(2) Items that are worth $20 or less (e.g., pencils, pens, hats, t-shirts, and other items worth less than $20, including meals), as long as those items do not exceed $50 per employee from any one vendor source per funding year

7. Exceptions to Gift Restrictions
Exception for charitable contributions
Service providers can continue making charitable donations to E-rate eligible entities in the support of schools – including, for example, literacy programs, scholarships, and capital improvements – as long as such contributions are not directly or indirectly related to E-rate procurement activities or decisions
Exception for personal gifts
There is an exception for gifts to family and personal friends when those gifts are made using personal funds of the donor (without reimbursement from an employer) and are not related to a business transaction or business relationship

8. Who is Subject to Gift Restrictions?
Service providers
All service providers with current or possible future E-rate relationship to applicant
All individuals who are on the governing boards of such an entity (such as members of the board of directors); and
All employees, officers, representatives, agents, or independent contractors of such entities

9. Who is Subject to Gift Restrictions?
Applicants
All individuals who are on the governing boards of such entities (such as members of a school board)
All employees, officers, representatives, agents, consultants or independent contractors of such entities involved on behalf of such school, library, or consortium with E-rate
Individuals whose work in any way relates to E-rate forms and technology plans;
Individuals who prepare bids, communicate or work with E-rate service providers, E-rate consultants, or with USAC; and
Any staff of such entities responsible for monitoring compliance with the E-rate Program

10. Presumably, affected staff includes, but is not limited to, school business officials, superintendents, technology directors, school board members, and library directors – anyone who has any role in procurement, E-rate, or technology planning

11. Other Important Gift Details
Aggregate value of all gifts to an E-rate applicant, from any employees, officers, representatives, agents, independent contractors, or directors of the service providers, are considered when computing the $50 annual limit
Rules are always applicable, not just during the time period when the competitive bidding process is taking place
State and local restrictions regarding gifts also still apply
If more stringent than federal requirements, violation of state or local provision constitutes a violation of the FCC rule

12. Does P1 vs P2 Matter?
If an applicant only applies for Priority 1 Services, gifts received from E-rate vendors that only sell Priority 2 equipment/services are not subject to the $20/$50 rule
If an applicant opts to apply for Priority 2 equipment/services for the first time, the applicant must have been in compliance with the E-rate gift rules for the six months preceding the posting of the Form 470
Vendor-sponsored trinkets, gifts, raffle-prizes, and hospitality suites at conferences ARE included in the Gift Rule restrictions

13. Disposal, Repayment, Tracking
Disposal of Gifts: Applicants may dispose of the gift in order for the value of the gift to not be counted toward the $20/$50 rule, but must be done so immediately
Such disposal should be recorded
Repayment of Value of Gifts: Applicants may repay to the vendor the retail value of the gift so the gift is not counted toward the $20/$50 rule if repayment is made immediately following the gift donation
Such repayment should be recorded
Both vendors and applicants must keep an annual record of the value of all gifts received and donated during each year (July 1 - June 30)
Such records may be requested during an audit or USAC investigation

14. Gift Examples Gifts OK Gifts NOT OK
Coffee and donuts at a presentation
Meal at presentation
Door Prize: Ball cap worth $20 or less
Door Prize: $30 gift card
Certificate or plaque presented at conference
Gold watch given as thank you gift
Travel, food or lodging at conference, even if you are speaking on behalf of the provider
Pens handed out a conference worth $20 or less
Conference giveaways: any item exceeding $20 in value (e.g. book bag or briefcase)
Holiday present to sibling, not reimbursed by company, paid with own funds
Customer Appreciation meal/gift exceeding $20

15. Gift Examples Gifts OK Gifts NOT OK
Joe Applicant gets $18 lunch from Larry, the Cable Guy. No other meals or gifts during the year from anyone employed by, or representing, the Cable Company.
No Rule Violation = Total gift below $20 and $50 threshold.
Joe Applicant gets $12 lunch from Larry, the Cable Guy three times during the year. (Total: $36 total). Larry’s boss, takes Joe to lunch for $18. (Total from Cable Company: $54).
Rule violation = exceeded $50 threshold
Jane Applicant wins mousepad at a conference from Internet R Us. (Value = $8)
Jane Applicant also receives $15 box of chocolates from Internet R Us.
No Rule Violation = Both below $20 and did not exceed $50 threshold.
Jane Applicant wins a wireless mouse and mousepad at a conference from Internet R Us. (Value = $24 +$8)
Rule violation: One gift exceeded $20 threshold.

16. Gift Examples Gifts OK Gifts NOT OK
Joe Applicant attends a conference and picks up a free ballpoint pen and stress ball from a company he’s never heard of. No further gifts are given.
No Rule Violation = Total gift below $20 and $50 threshold.
Joe Applicant is invited to a customer appreciation lunch at a seminar. Meal value = $22
Rule violation = exceeded $20 threshold
Jane Applicant received a bag of peaches in the summer from a provider.
Value of peaches = $10
No other gifts are given by anyone from that company for the rest of the year.
No Rule Violation = Below $20 and did not exceed $50 threshold.
Jane Applicant is invited to speak at a conference regarding services she gets from a provider. The provider offers to pick up travel costs.
Rule violation: Total gift exceeded $20 threshold.

17. Gift Examples Gifts OK Gifts NOT OK
Joe Applicant (district discount 43%) attends a conference and is taken to lunch by Polycom. Lunch costs $25.
No Rule Violation = Applicant does not apply for Priority 2 funding and Polycom does not provide Priority 1 services.
Jane Applicant (district discount 72% but one 90% building will apply for video codecs in FY 2011 for the first time ever) receives a free ipod from Polycom at a conference in November 2010.
Rule Violation = iPod over $20 value, gift was given less than 6 months before 470 was posted.
Jane Applicant (district discount 72% but one 90% building will apply for video codecs in FY 2012 for the first time ever) receives a free ipod from Polycom at a conference in November 2010.
No Rule Violation = Although iPod over $20 value, gift was given more than 6 months before 470 was posted.

18. Questions on Gift Rules?

19. FCC EDU: Off-Campus Wireless Pilot
Called ‘EDU’ – E-rate Deployed Ubiquitously
New pilot program that will provide funding for off-campus wireless connectivity through mobile devices
Competitive grant
$10 million in FY2011
Schools and libraries were eligible
Preference given to those already implementing such programs  
Pilot will gather more information about issues affecting such use which can later be used for permanent rules
4 PA applicants; 80 nationwide
Winners should be announced by July
EXPECT THIS TO EXPAND IN FUTURE YEARS

20. Funding Cap Increased to Inflation
Since the program's inception, E-rate funding has been capped at $2.25 billion
Beginning in FY 2010, the cap will increase for inflation, based on the Department of Commerce's Gross Domestic Product numbers
FY 2010 cap will increase to $2,270,250,000
$20.25 million
The cap will not decrease in event of deflation and will be in addition to any rollover funds from previous years' undisbursed funding

21. Eligible Residential Locations
Beginning with FY 2011, residential locations within eligible schools will be eligible if they serve:
tribal students
children with physical, cognitive, or behavioral disabilities
juvenile justice students, or
residential schools where 35% or more of their students are eligible for NSLP 
Schools can be public or private and both Priority 1 and Priority 2 services are eligible
Residential locations of cyber school students or employees are NOT eligible

22. Change to Tech Plan Rules
Beginning with FY 2011, budget no longer required as part of tech plan
Beginning with FY 2011, E-rate will only require written or approved tech plans if applying for Priority 2 funding (internal connections or basic maintenance)
If only applying for P1, Item 26 on Form 471, check off the box that says:
“I certify that no technology plan is required by Commission rules.”

23. Community Use of Services
Schools may now permit general public to use the schools’ Internet access during non-school hours – at the school
Until February 2010, such Internet access was only permitted to be used by K-12 students and staff for educational purposes only, putting many schools and most vocational technical schools in a difficult position
In February 2010, the FCC permitted such usage on a temporary basis
3 conditions for community use of school facilities:
Usage is permitted only during a school’s “non-operating” hours or summer 
School may not request E-rate funding for a higher level of service than would be required for educational purposes
Schools may not charge for the use of the Internet access, but may charge reasonable fees to cover overhead costs from individuals that use the schools' services and facilities
Organizations using a schools' services are permitted to recover related costs (e.g., “curriculum development and presentation costs”) from attendees

24. Community Use of Services
School not required to open facilities
Internet filtering rules must remain intact during use
New rule in no way permits schools to share their bandwidth with other ineligible entities, such as an off-site after-school program at the YMCA or community center
Also does not permit partially eligible entities, such as a Diocesan office that provides services to both schools and the church, to stop cost allocating the ineligible portion of Internet use

25. Lit Fiber Eligibility
Can be leased from telecommunications provider (such as Verizon, Comcast, Sunesys, PenTeleData, Sting, etc.) OR
Beginning in FY 2011, can be leased from ANY other provider (such as electric company, cable company, regional network, etc)
Post in both telecom and internet category on Form 470
Vendors must light fiber

26. Dark Fiber Eligibility
Beginning in FY 2011, applicants may lease dark fiber from any provider (including non telecom carrier)
Such as Nittany Media, Adams Cable, IUs, electric companies, etc.
Conditions:
E-rate will not pay for the building of new fiber networks off school property
Installation (non-recurring) charges are eligible from school building to edge of school property
Unclear whether NRC costs can be bundled with MRC
Modulating electronics must be provided by the applicant and cannot be bundled with the cost of the service
This equipment is eligible for Priority 2 funding
Purchase of fiber still not eligible

27. Transfer of Equipment
OLD and UNCHANGED: E-rate funded equipment must remain at approved site for 3 full years after installation
After which it may be moved to another eligible location, providing documentation is retained describing transfer
If school or library closes, equipment may be moved to another entity, regardless of discount
Must send letter to SLD outlining closing of school and transfer of equipment
Must keep documentation regarding transfer for 5 years
NEW: After 5 years, equipment may be disposed of or sold
Disposal does not need to be reported to USAC
Proceeds from sale do not need to be returned to USAC

28. Basic Maintenance of Equipment
Beginning in FY 2011, maintenance severely curtailed
Eligible:
Bundled manufacturer warranties up to 3 years
Cannot have a separate price
Software, patches, online support
Can be invoiced at beginning of year for whole year, regardless of actual usage
Actual labor and break-fix cost
Can only be invoiced after service used
Ineligible:
Unbundled warranties, insurance-type warranties, including traditional Smartnet

29. Unbundled Break/Fix Maintenance
Reimbursement amount
USAC will only pay for cost of actual work performed (which includes labor, equipment fix, or if it is beyond repair, equipment replacement)
Calculation of funding request for parts/fix/labor:
Must be based on an estimated number of maintenance hours per year for eligible equipment, based on current life of equipment and history of needed repairs
Contract:
Must separately identify cost of maintaining E-rate eligible equipment from E-rate ineligible equipment
May not mix E-rate eligible maintenance services with other ineligible services (such as help desk or monitoring services)

30. Cisco Smartnet
Due to new E-rate restrictions, Cisco has completely revised pricing structure for E-rate purchases.
CiscoBASE = software, patches, tac support
Included with 1st year of purchase price
After 1st year, applicants will be required to post 470 and apply for this service separately (expected to be 80% of Smartnet cost)

31. Cisco Smartnet Cisco Advanced Replacement = next-day
Included for 3 years with purchase price
After 3rd year, applicants will be required to post 470 and apply for this service separately.
E-rate will then only pay if advanced replacement/labor is actually used. Will not pay for full annual price.

32. Questions? FCC EDU Lit/Dark Fiber eligibility Transfer of equipment
Technology plans
Community use of services
Basic maintenance/Smartnet
Anything dealing with eligible services?

33. Changes to CIPA Law New CIPA Law passed October 2008
In Nov 2009 NPRM, FCC did not include guidance on the extent to which online safety must be taught -- likely leaving this up to each school to decide
CIPA Order should be released in coming months that will contain details of implementation requirements
Will likely be effective beginning July 1, 2011

34. Changes to CIPA Law
Internet Safety Policies will be required to include
"... educating minors about appropriate online behavior, including interacting with other individuals on social networking websites and in chat rooms and cyberbullying awareness and response."
Essentially means that schools must educate students related to online safety in order to receive E-rate funding
If you haven’t done so already, amend your Internet Safety Policies now and include this training in your curriculum
Law will NOT be retroactive
Don’t be fooled by companies that claim they are FCC-approved to provide this training or that you are required to purchase their product in order to be compliant

35. Filtering: Who, What and When
New CIPA Order likely to answer these key questions:
School-owned computers used off-campus using private Internet
Anticipated: MUST FILTER
School-owned computers used off-campus using District’s Internet
Student/teacher owned computers used on-campus but using District’s Internet
Student/teacher-owned computers used on-campus but using personal Internet (aircard)
Anticipated: NO FCC REQUIREMENT TO FILTER
BUT: This should be addressed in your District’s acceptable use policy

36. Big Changes to Audits
For last 3 years, FCC Inspector General required Attestation Audits of E-rate applicants
Attestation audits are most severe type of audit
Audit program being revamped
Attestation audits replaced with PQA Audits and Program Compliance Audits
Program Compliance Audits – largest of audits
Will begin around April 2011
Conducted mostly off-site
Will determine if you followed program rules

37. PQA: Program Quality Assurance
20-60 PQA Audits per quarter
Request sent to the entity's contact person via and is based solely on a single invoice that has been paid by USAC
Proof of non-profit status
Proof of eligible school or library status
List of endowments
List of all entities receiving services
List of specific services that corresponds to invoice
Dollar amount of invoice paid by USAC
Copy of invoice showing discount applied
Copy of check showing reimbursement from vendor, including cancelled check or bank statement
Tech plan approval letter(s)

38. Document Retention
Rules require all applicants to retain ALL E-rate and related documents for 5 years from last day of service in a particular funding year (which is basically 6.5 years)
If auditor visits in 4 years, and documents are missing, it could be the basis to recover all funding from that funding year
Document and keep everything remotely related to E-rate
Like what?

39. Documents to Retain Tech plan and approval letter
Proof of date tech plan “written”
Consultant agreements
RFP and proof of publication date
All vendor correspondence
Winning and losing bids
Professional development sign-in sheets
Bid evaluation documentation
Proof of authorization to sign E-rate forms
Filtering records and payments
NSLP forms and enrollment records
Notification to vendor when changing service providers
AUP and proof of public meeting
Signed contracts
Budgets
Purchase orders
Packing slips
Asset or inventory records
Installation records
All vendor invoices
Front and back of checks as proof of payment to vendor (non-discounted share)
Proof of receipt of payment from vendor (BEAR checks)
Soon: Proof that you are educating students about online safety

40. Reminders... Last possible day to post 470 = February 24
Last possible day to post 471/Item 21 attachments = March 24
School closings: Build-in no liability clauses for school building closures
Calculating pre-discount price: If your vendor charges USF fee, be sure to calculate using 15.5% USF rate

41. New Form 470
Contains most changes...

42. Changes to Form 470 New Question: Applicant Demographics:
Public
Private
Charter
Tribal
Head Start
State Agency
You must check at least one option
You may check multiple options

43. Changes to 470
Applicants must identify any and all consultants that assisted with the preparation of each form
Consultants will be assigned a Consultant Registration Number (CRN)
This number must be provided on the form
Form field should populate with contact info for that consultant
Also must identify actual consultant employee’s name(s)

44. Changes to 470
I certify that, if required by Commission rules, all of the individual schools and libraries receiving services under this form are covered by technology plans that do or will cover all 12 months of the funding year, and that have been or will be approved by a state or other authorized body, or an SLD-certified technology plan approver, prior to the commencement of service OR
I certify that no technology plan is required by Commission rules. (new)

45. Form 470 – Deleted Fields
T/MTM or contract information (Current Items 7a – 7c)

46. Form 470 – Deleted Fields
SPI/BEAR/No preference (Current Items 8b, 9b, 10b, and 11b)

47. Form 470 – Deleted Fields
Basic Telephone Service (Current Item 14)

48. Form 470 – Deleted Fields
Necessary Resources (Current Items 15a-15f)

49. Form 470 – Deleted Fields
Phone numbers and prefixes (Current Item 16c)

50. Form 470 – Deleted Fields
Ineligible participating entities (Current Item 18)

51. New Form 470 Online

52. New Form 471
Not as many changes....

53. Changes to Form 471 New Question: Applicant Demographics:
Public
Private
Charter
Tribal
Head Start
State Agency
You must check at least one option
You may check multiple options

54. Changes to 471
Applicants must identify any and all consultants that assisted with the preparation of each form
Consultants will be assigned a Consultant Registration Number (CRN)
This number must be provided on the form
Form field should populate with contact info for that consultant
Also must identify actual consultant employee’s name(s)

55. Changes to 471
I certify that, if required by Commission rules, all of the individual schools and libraries receiving services under this form are covered by technology plans that do or will cover all 12 months of the funding year, and that have been or will be approved by a state or other authorized body, or an SLD-certified technology plan approver, prior to the commencement of service OR
I certify that no technology plan is required by Commission rules. (new)

56. Changes to Form 471 Block 4: Discount Calculation Worksheet
Libraries must now provide urban/rural and student count information on the worksheet
Certain entity-level data added or requested in a different format
Block 6: Certifications and Signature
Some certification language changed
Consultant as authorized person checkbox added

57. Changes to Form 471 Block 2: Impact of Services Ordered
BEFORE ORDER column removed
“AFTER ORDER” columns to complete:
Individual schools and school districts complete the “Schools” column
Libraries and library consortia complete the “Libraries” column
Consortia complete one or both as appropriate depending on the consortium members

58. Changes to Form 471
Block 2: Impact of Services Ordered – Items 7a through 7g
Number of students (schools) or patrons (libraries)
Number of (class)rooms with telephone service
Number of drops (direct Internet connections)
Number of (class)rooms with Internet access
Number of computers or other devices with Internet access
Number of dial-up (<56K) Internet connections
Direct broadband services (next slide)

59. Changes to Form 471 __ < 200 kbps __ 10 – 25 mbps
Block 2: Impact of Services Ordered – Item 7g
Direct broadband services: Number of buildings served at the following speeds:
__ < 200 kbps __ 10 – 25 mbps
__ 200 kbps – 1.5 mbps __ 25 – 50 mbps
__ 1.5 – 3 mbps __ 50 – 10 mbps
__ 3 – 10 mbps __ > 100 mbps

60. Changes to Form 471
Block 4: Discount Calculation Worksheet (continued)
Schools must also include the following information if applicable (more than one may apply):
Pre-kindergarten
Head Start
Adult Education
Juvenile Justice
Educational Service Agency (ESA)
Dormitory

61. New Form 471