1. Rex Miller E-Rate 2.0 Update August 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 FCC order We will have future sessions closer to the filing window to discuss updates and more detailed filing instructions, tips, etc. 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 2.0 Things to Remember All of this subject to - Further releases by FCC –  Additional orders and clarifications Eligible Services List –  Draft released 8/4 – consistent with Order SLD –  Fall Training + 40 short videos + Webinar E-Rate form changes –  SLD plans new 470 and 471 at least 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 And don’t forget – ALL of this is considered a two year TEST – that could be undone (at least the eligibility parts) – after two years Stay tuned for more changes and updates

5. Goals 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

6. 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 »ENA – no other changes to IA/Broadband apparent »Discount rates remain same matrix –Category 2 – Internal Connections

7. Category 2 Category 2 – Internal Connections $1 B target for internal connections  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

8. Category 2 Managed Wi-Fi Eligible –  Renamed Managed Broadband Internal Connections by FCC  Third party service allowed for LAN and WLAN management Eliminated –  Circuit cards/components  Interfaces  Gateways  Antennas  Servers  Telephone components  Video components  VOIP and Video over IP components  Data protection other than firewall and UPS –Such as VPN

9. 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  No extra funding for rural remotes – all equal 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

10. 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

11. 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  900/976 Call Blocking  Inside wire maintenance plans 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

12. Measurements Measurements – used SETDA targets  Internet Access – 100 Mb per 1,000 users today  Internet Access – 1,000 Mb per 1,000 users long-term  WAN/Last mile – no short-term target  WAN/Last mile – 10 Gb per 1,000 users long-term FCC says “1 Gb fiber can be readily scaled to 10 Gb with upgraded networking equipment” IA/WAN Affordability – price per Mb and per user/device to be tracked and reported  Also price by physical layer type, service type, geography, carrier, carrier type and purchasing mechanism

13. Measurements – LAN/WLAN LAN/WLAN – FCC is going to do a survey to determine how to measure and then set goals/track affordability  Paragraph 54 – contradictory – measure pricing as a function of number of users  Track pricing by eligible components including management  Track utilization and performance  Track replacement and upgrade cycles and architectures to measure cost effectiveness

14. Measurements - Networks Bandwidth utilization and network performance statistics  FCC assigned the Wireline Competition Bureau (WCB) to determine measurement methods –ENA – potential for time-consuming/expensive reporting requirements?  FCC assigned WCB/USAC to develop and maintain best practices and benchmarks for network utilization, architecture, performance, optimization and management –ENA – No indication re who is going to do this at WCB/USAC at this time

15. E-Rate 2.0 Break

16. Goal 2- Maximizing Cost Effectiveness Adopt Cost Transparency to share cost and connectivity data Encourage Consortia Purchasing Emphasize Lowest Corresponding Price

17. Cost Transparency Adopt transparency to share cost and connectivity data  Item 21s to be standardized and available to public »WCB assigned to make this happen  Contracts requiring no price disclosure will be ignored in the future  FCC decided not to require disclosure of other data at this time »For example – no disclosure of all bid prices »FCC decided not to require all bids to be submitted to SLD ENA - Thank goodness

18. Encourage Consortia Purchasing Preferred Master Contract (PMC)  For Category 2 equipment only  Nationwide contracts only »ENA – no idea what these are yet/is this GSA?  Selected by WCB based on “excellent” pricing  WCB can decide whether 470 can be waived and whether the preferred contract must be evaluated by all applicants in any 470

19. Encourage Consortia Purchasing Preferred Master Contract (con)  FCC declined to force applicants to use preferred master contracts “at this time”  Applicants who have 470s for items on the preferred master contracts must include the PMC in their bid eval »ENA - How is that possible for an RFP situation? »ENA - Where is the list of these contracts? »ENA - How will applicants know that a certain model on the preferred list is compatible with what they want to buy when applicants must accept bids for “and equivalents”

20. Encourage Consortia Purchasing Consortium Purchasing  FCC did not address any other consortium purchasing incentives in this section  FCC included further requests for comment on consortium incentive items including – –Providing 5% consortium incremental discount –Changing consortium discount rate to weighted average –Allowing states to appoint consortia –Criteria to earn 5% incentive –Require consideration of state master contracts in all bid evaluations

21. Goal 3 – Making E-Rate Fast Simple and Efficient Streamline application process Simplify discount rates Simplify invoicing/disbursement All appeals must be first filed with USAC Additional measures to improve SLD administration Protect against fraud, waste and abuse

22. Streamline Application Process Simplify multi-year contracts  File 471 in first year  File Form TBD in second year to explain »Continuation of multi-year contract »Identify and explain changes to application such as Discount rate Membership of consortium Services ordered Changes must be consistent with scope of original 470 and contract ENA – SLD will get to decide this

23. Streamline Application Process Exempt low-cost high-speed broadband from competitive bidding  Can buy $3,600 per year 100 Mb down/10 Mb up commercially available broadband –No 470 required »ENA - Does not impact local procurement laws »ENA – have to be prepared to defend that you bought from a commercially available offering SLD will decide whether you did this correctly Will this save small applicants time?  FCC can change the minimum speed requirements to qualify each year »Even if you are in a multi-year contract for a fixed speed

24. Streamline Application Process Ease the signed contract requirement  Signed contract is no longer the only accepted way to prove a legally binding agreement before filing 471 »However, you still have to prove a legally binding agreement Contract is still best way to do that per FCC They may accept e-mails indicating an “offer” from the vendor that was “accepted” by the applicant ENA – very risky to rely on this “easing” of the rules – better to just start early enough to get a signed contract done in time ENA – not sure if the FCC’s simple concept of what is legally binding is consistent with state and local law – be wary of that issue as well before relying on anything other than a signed contract

25. Streamline Application Process No E-Rate tech plan required going forward Requires electronic filings  ENA - No indication yet of whether the PIN issuance method will change and how that impacts this requirement Enables direct connections between schools and libraries  “We allow rural schools and libraries to establish direct connections” »ENA - The FCC states that to get approval of direct connection that an FCC waiver must be filed »ENA – they changed many rules in this Order, why did they not fix the rules to allow this – filing a waiver just to get approval seems an odd simplification

26. Streamline Application Process Measurement of USAC/SLD performance –  Goal to fund all “workable” applications by 9/1  Workable = not subject to investigation, audit or similar reason for delay »ENA – it appears USAC determines what is workable? »ENA – this appears to be a soft target with no disclosed enforcement penalties for USAC

27. Simplify Discount Rates Require district-wide discount rate  Total NSLP/Total Students based on district wide numbers not school by school –Per FCC, this will allow SLD to let you add sites as needed to your applications New source of urban/rural designation  FCC moving to US Census Bureau data –Can go to US Census Bureau website to check your schools now »ENA – be alert for more specifics regarding how to find this info – watch SLD website for how to use/tools »District is “rural” if majority of schools are rural No indication what to do if 50% rural No indication if size/student count matters

28. Simplify Discount Rates National School Lunch program changes – CEP option  New detailed calculation standards available –Based on 1.6x certified  See Order or watch for updates on SLD website F/R survey changes  Surveys can no longer be extrapolated to schools population if you get more than 50% back  You can only compare the received surveys to the total student count for the school »ENA – death blow for surveys to a large extent

29. Simplify Invoicing/Disbursement Direct Bear invoicing by Applicants and disbursement to Applicants  Service providers not required to sign the Bear forms  Applicants will have to provide USAC with electronic disbursement instructions – no paper checks  No payments to consultants – only directly to applicants  ENA – Make sure you evaluate impact of this new process on historical Bear use

30. Simplify Invoicing/Disbursement Adopting an invoice deadline  Invoice deadline codified – but not changed –120 days after last day to receive service or –120 days after Form 486 notification date –Whichever is later  Extensions streamlined –Only allowed 1 extension of 120 days »No reason required for extension  These changes will allow FCC/SLD to de-obligate funds more quickly and do rollovers of unused funds more quickly

31. Additional Measures All Appeals must be filed first with USAC/SLD  No loss of ability to appeal to FCC if USAC denies appeal  Waiver requests still go direct to FCC Additional measures to improve SLD administration  Speeding review of applications, commitments and disbursements  Modernizing USAC IT systems  Adopting open data policies  Improving communications with applicants and providers

32. Protect Against Waste, Fraud and Abuse Increase Document Retention from 5 to 10 years  Recent FCC appeal indicated that they can go back even beyond 10 years if circumstances merit »ENA – consider keeping all E-Rate documents effectively “forever”  Must allow auditors and investigators on premises New FCC Strike Force on Waste Fraud and Abuse  Covers all USF programs

33. E-Rate Rest Stop

34. Further NPRM FCC asking for more comments on:  Funding for E-Rate  Whether to limit contracts to 5 years »Other than for high cap ex contracts to install new facilities  Requirement to use state reported NSLP data only »As reported to FNS »ENA - No changes to Pre-K – still ineligible – so not sure how that impacts this  Consortium discount rate calculations »Use weighted average  Consortium incentives »As described earlier

35. 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 and CEP Start thinking about your budget  Can you get $ for new Category 2  Impact of Voice and other changes Expect more enforcement  Even some of the FCC Commissioners suggest that the FCC will be looking for money

36. Things We Think We Know Simplification looks very complex  Preferred price lists for Category 2 items  Different forms for different years of multi-year contract  Lots of assignments to SLD and WCB to track pricing and gather data from applicants in more pervasive manner 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

37. Things We Think We Know Change your policies for E-Rate 2.0  Document retention to 10 years »ENA - recommend you never throw it out »Consider electronic file retention vs. paper  Technology plan elimination –However expected requirements to show network plans, utilization, etc. to USAC

38. Things We Think We Know Expect more FCC/WCB/SLD involvement  Preferred National Contracts  FCC/SLD developing lists of best network practices  More and more information appears to be required for SLD to review and publish »Pricing and service levels among others  Very close to having FCC require purchasing off of national or state master contracts  Very close to having to submit all bid responses to USAC/SLD  Much of this is “assigned” to WCB and SLD and still to be designed/released –Be alert for form changes, surveys and new forms

39. 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  New Discount Rate formula – can’t test one school, will they test the whole district  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

40. What Now? Be alert for additional information to flow  Eligible Service List – draft to be finalized  More FCC updates, orders, clarifications  Changes to FCC Forms to match the Order  Additional changes from FCC/USAC on items that were assigned to WCB/USAC Be careful on 470s and bids  Make sure you check rules on Preferred Contracts and other changes before you do your bids Use resources  SLD website, fall training and News Brief  Third party, state, vendor and other district resources  You are not alone!

41. 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

42. Until we talk E-Rate again

43. www.ena.com @ENAconnects facebook.com/ENAconnects Contact ENA Today Rex Miller rmiller@ena.com - 615.312.6000