Year three of the E-rate to simplify forms, encourage multi-year contracts

Internet Strategies for Education Markets: The Heller Report, Oct, 1999 by Sara Fitzgerald

The third year of the E-rate program should be getting launched within a matter of weeks, with some changes in store for both applicants and vendors.

In the meantime, the program continues to distribute money to cover applicants' costs in the first funding year, while making new funding commitments for the second funding year, which runs from July 1, 1999 to June 30, 2000. One consequence of the schedule for vendors is that the lead-times for E-rate supported projects can be very long.

As of July 22, the Universal Service Administrative Company had distributed about $666 million of the $1.67 billion that the Schools and Libraries Division had authorized through last February. Schools and libraries had until Sept. 30 to complete their internal connections and other one-time installations, and applicants and vendors will have until Dec. 15 to submit their paperwork to qualify for first-year funding. The only exception is expected to be made in cases where an applicant was able to qualify for funding through an appeal.

The SLD began issuing funding commitments for Year 2 on July 12, and issued a "wave" of commitments every week thereafter. Through Sept. 17, about $792 million had been committed, or about 35 percent of the $2.25 billion pot that the Federal Communications Commission has approved for the second year. The SLD hopes to finish issuing all of the Year 2 commitments by mid-October, but that will depend on whether its auditing staff can complete their review of the largest, most complicated applications by that date.

That time lag means that in the second funding year, the SLD will once again have to permit applicants to use the so-called BEAR forms to get reimbursed for purchases they have already made. The official announcement has not yet been made, but the FCC has apparently approved the use of the BEAR form for the full funding year. In the case of telecommunications services and Internet access, it is expected that service providers will be permitted to choose which payment method they want their customers to use, BEAR forms or discounted invoices. In the case of internal connections, it is expected that applicants will be allowed to make that decision because of the substantial costs that can be involved.

Over the past few months, the SLD has taken several steps to try to simplify the application process for Year 3. Both the Form 470 and Form 471 application forms are expected to be streamlined. And under the proposed changes, an applicant would no longer have to file a Form 470 during the filing window, but could do it anytime after the start of the funding year on July 1.

For the short term, at least, applicants may not notice that change. Although the SLD has said applicants can begin filing applications immediately if their own procurement cycle is a lengthy one, it wants most applicants to wait until the revised forms become available, probably sometime in October. If the latest proposed timetable holds up, the filing window for Form 471 applications covering July 1, 2000 to June 30, 2001 will run from about mid-November to mid-January. If it can meet that schedule, the SLD hopes to issue all of its Year 3 funding commitments by early May-- before the start of the next funding year on July 1.

The proposed changes may give applicants a greater incentive to sign multi-year contracts. Under the proposal, applicants would not have to file a Form 470 every year to cover a multi-year, existing contract that has previously been posted to the SLD's Web site.

Under the latest version of the proposed Form 471 instructions, applicants are told they can use a "vendor-created list," or a bill or invoice that provides a breakdown of the products they are purchasing as a required attachment detailing the products or services for which they are seeking E-rate support. This kind of detail should help the SLD auditing staff determine whether an applicant is seeking support for ineligible services.

Sara Fitzgerald is vice president, communications, of Funds For Learning, LLC, an educational consulting firm specializing in the E-rate program.