1. Rex Miller E-Rate Update Fall 2014

2. Introduction E-Rate 2.0 has arrived Today’s session is focused on the changes enacted by the recent E-Rate 2.0 and 2.1 FCC orders Seek out experienced assistance as you prepare and work through the next E-Rate season Q & A At the end of the presentation ENA is available at your convenience Webinar will be available on the ENA website at www.ena.com

3. ENA Background Customer service and education focus K-12 customized service E-Rate expertise E-Rate Program Service Provider since Year 1 (1998) Experienced E-Rate team Rex Miller, April Scott, Kris Vivrette, Madeline Dusenberry, Ward Chaffin E-Rate Service Provider Leader A Top-10 E-Rate Service Provider Over $500M in E-Rate funded Over $144M in 2014 E-Rate filings

4. E-Rate News Window Opening Date set Opening anytime after Dec 29, 2014 Closing to be determined – expected in March Similar to last year Eligible Services List issued for ’15-16 Streamlined to match the E-Rate 2.0 order Includes overview of items removed from list New 470 and 471 for ‘15-16 E-Rate Order 2.1 Approved December 11 th Actual order to be released

5. E-Rate 2.0 Things to Remember On Dec 11 th, the FCC approved the 2 nd Order related to E-Rate 2.0 The Main Focus is an increase in E-Rate funds of $1.5 Billion Final Order is still not released, but there are some additional changes that will need understanding – mainly related to more flexibility to get dark fiber and rural connectivity where none exists today All of this subject to - WCB/USAC interpretation –  Where they are tasked to figure things out PIA Review 2015 –  Where the things they don’t always tell us will be implemented re: testing New FCC Strike Force to combat waste fraud and abuse The original order indicated that much of this was a two year test and would be revisited – we believe the second order may have removed the “two year test” concept from some items Stay tuned for more changes and updates

6. Goals Per FCC, E-Rate 2.0 has three main goals: 1.Affordable access to high speed broadband 2.Maximizing cost effectiveness 3.Making E-Rate fast, simple and efficient We will attempt to combine both orders in the overview

7. Goal 1 – Affordable Access to High Speed Broadband Affordable access to high speed broadband  Created Category 1 and Category 2 –Category 1 – Broadband – this is funded first »Discount rates remain same matrix »Construction cost amortization no longer required – can receive all construction costs in Year 1 »Certain differences between dark fiber and lit fiber have been removed »Applicants may be able to construct their own fiber if most cost-effective and subject to certain safeguards to be described in Order 2.1 –Category 2 – Internal Connections

8. Category 2 Category 2 – Internal Connections $1 B target for internal connections  Order 2.1 seems to guarantee the $1 B target each year  This not just Wi-Fi  Shortened list of eligible items –Routers, Switches, Wi-Fi –Added caching –Cloud services OK –Basic maintenance of eligible items is OK as part of the per student cap ENA – even if districts have Wi-Fi, they still get to spend $150 on basic maintenance, routers, switches, etc. for LAN

9. Category 2 Managed Wi-Fi Eligible –  Renamed Managed Broadband Internal Connections by FCC  Third party service allowed for LAN and WLAN management Eliminated –  Everything else – including PBXs and Servers

10. Category 2 Funding 90% discount reduced to 85%  All other discount levels unchanged $150 per student available over 5 years ($2.30 per square foot for libraries)  Can be received all in year 1  Ordered by discount rate  5 year applicant “budget”  $9,200 funding floor per school/library  NIFs will typically not be eligible for WiFi  Order 2.1 includes more $ for large urban libraries ($5 per sq ft) Current 2 in 5 rule removed Student Counts –  Can use estimate for new buildings  Can count students at 2 buildings if attend multiple schools Category 2 Installation can begin on April 1st

11. Category 1 Services Phase down support for Voice, VoIP and other legacy services  Voice including VoIP and cellular/mobile –20% discount rate reduction per year starting 2015 Items removed 2015 – no phase-down »Web Hosting »Voice Mail »E-Mail »Paging »Texting »Directory Assistance

12. Category 1 Services Items removed 2015 – no phase-down  Cell Service data plans and Air Cards – unless they can be cost effective vs. other internal broadband or external broadband –USAC will have a presumption that data plans and Air Cards are not cost effective and you will have to prove otherwise  Custom Calling Plans  Direct Inward Dialing ENA – some pieces of currently eligible voice are immediately ineligible and some are phased out  Need to watch how PIA treats this as some of these items are normal components of voice service – like a phone number/DID No exceptions or grandfathering for existing multi-year contracts Order 2.1 affirmed that they will make certain voice items immediately ineligible despite the complexities (and low value)

13. Goal 2- Maximizing Cost Effectiveness Adopt Cost Transparency to share cost and connectivity data  Item 21 Data now public Encourage Consortia Purchasing  Still being determined Emphasize Lowest Corresponding Price

14. Goal 3 – Making E-Rate Fast Simple and Efficient Streamline application process?  SLD goal – all workable applications approved by 9/1  Tech Plan eliminated Simplify discount rates?  District wide rate – not school by school  CEP option method available  Rural/Urban – now using Census Data Simplify invoicing/disbursement  BEAR payments direct to applicants – next year Protect against fraud, waste and abuse  Increase Document Retention to 10 years  Order 2.1 affirmed change to 10 years

15. Further NPRM FCC Open Items:  More Funding for E-Rate? –$1.5 B added in Order 2.1  Whether to limit contracts to 5 years –Unknown  Consortium discount rate calculations and incentives –Unknown  Urban Clusters? –Order 2.1 changes urban clusters under 25k to rural –This should resolve the concerns re rural vs urban  Release of detailed Order 2.1 still pending –Not sure what else might be in it –Be alert for info from that final release of details

16. Things We Think We Know Test your discount rate now so that it is not a surprise  Could have changes due to district wide average/CEP Start thinking about your budget  Can you get $ for new Category 2 –FCC/SLD encourage all to apply? –Order 2.1 seems to confirm that there will be $1 B –Will Category 2 get any leftover $  Impact of Voice and other changes –20% Phase Down means 20% of total cost of voice

17. Things We Think We Know Lots of items with different treatment  New discount rates for Category 2  Different discount rates for Voice vs. Internet  Lots of miscellaneous charges are now ineligible and have to be cost allocated out  Dark fiber options are more prevalent for underserved

18. Timing of 2015 Approvals 2014 Year has been a great year for approvals – much improvement  2014 year had unique circumstances »No P2 funding for two years leading to significantly fewer applications to review »More staffing hired to make sure process was faster 2015 year is much more complex  New Category 2 funding to be approved  Integration of significant changes in eligible services  Up to three different discount rate matrixes to apply  Potential for high $ fiber construction applications  Additional items requiring changes to forms and practices Expect significant slowdown in approvals – especially if FCC wants to push Category 2 approvals faster or at equal speed as Category 1 funding requests

19. New Forms Form 470  Very few changes  Can use 2014 form until new form is available online Form 471  Redesigned to meet new rules  New questions regarding network scalability  Discount Rate changes included  Separate category for Voice Services  Item 21 part of 471 – not a separate attachment  Category 2 Budget Information  Test this when it is available

20. 471 Timing

21. E-Rate Timing Soapbox E-Rate continues the trend of the later closing of filing window in March Strongly encourage applicants who want to get approved before July 1 to file their 471s as soon as possible Target mid-February at the latest PIA will likely start for you before the 471 filing window is closed, so be ready Advantages Earlier approval No last-minute rush to file If you have an error, you can file another 471 before filing deadline and cancel initial incorrect filing – probably easier than using RAL process

22. Resources Contact ENA Rex Miller – rmiller@ena.com April Scott – ascott@ena.com Kris Vivrette – kvivrette@ena.com Ward Chaffin – wchaffin@ena.com Madeline Dusenberry – mdusenberry@ena.com SLD News Brief – make sure your are signed up for these e-mails Go to the SLD website’s training section to sign up Key info provided on changes to the program all year long Websites SLD – main E-Rate rule site – training/WebEx  www.universalservice.org/sl/ www.universalservice.org/sl/  Separate section of SLD website for E-Rate 2.0 updates  Fall training slides will be posted if you cannot attend  E-Rate Modernization section and webinars

23. www.ena.com @ENAconnects facebook.com/ENAconnects Contact ENA Today Rex Miller rmiller@ena.com - 615.312.6005