WCB Cuts Some Slack For Universal Service E-Rate Recipients

Telecom Policy Report, Sept 25, 2006

The Federal Communications Commission (FCC) in recent weeks has been cutting school and libraries districts that receive universal service fund (USF) E-Rate subsidies some slack regarding some procedural and bureaucratic transgressions. One of its bureaus has been authorizing the consideration of monetary outlays that may have been passed up in the past due to various glitches in applications or timing.

In one fell swoop, the regulator's Wireline Competition Bureau apparently has decided to overlook missed filing deadlines by 128 school districts, ostensibly on the grounds that the application process is complicated and time- consuming. The WCB also decided to forego any penalties on late filers whose initial applications had administrative or clerical errors. In another order, the bureau allowed 91 recipients to receive discount rates although there were questions surrounding incorrect calculations of their appropriate discount rates.

In both cases, the WCB essentially overruled decisions made by the independent Universal Service Administrative Company (USAC) that has been running the entire USF program for several years, including the congressionally mandated school and library USF mechanism, aka E-Rate. Recipients in both matters appealed the USAC decisions, and the bureau in effect granted those appeals. The dollar values involved in the disputes weren't revealed, but what appeared to be more important to the bureau was that the cases involved no evidence of waste, fraud, abuse or misuse of funds; or any failure to adhere to core program requirements.

The tardy-filer decision to some extent has been anticipated since mid- May when the FCC ruled in favor of some 196 appeals in what was called the "Bishop Perry Middle School" proceeding that involved a New Orleans district. The commission dropped the item from its May 2 open-meeting agenda, and it subsequently released a 32-page order May 19 to clarify, streamline and correct the minutiae of FCC Forms 470 and 471 surrounding such certifications.

Another Type Of Form Factor

The issue surrounding the 128 appeals involved USAC either reducing or denying funding from E-Rate on the grounds that the districts failed to submit FCC Form 486 in a timely manner. The appealing districts claimed their filings were on time or that late filings were the result of "immaterial clerical, ministerial or procedural errors" or that late filings were due to circumstances beyond their control. (The background: Form 486 confirms that relevant services have begun, it specifies the service start dates, it demonstrates that the applicant has received approval of its technology plans and it ensures disbursements for discounts on eligible services. USAC only will issue money to service providers for discounts on eligible services after receipt of the form, and the WCB sided with the districts, remanding the applications back to USAC.)

The other 91 appeals regarding incorrect discount calculations revolved around district disputes with USAC over whether sufficient information was provided to qualify for the appropriate discount rates for private schools in Puerto Rico and whether other stateside applicants were given sufficient opportunities to provide evidence to support their specific, requested discount rates. This also appeared to be Form 470/471-related, but the dispute also had at stake a number of factors mixing high-cost status and poverty levels of districts. There reportedly are special rules applicable to private schools in Puerto Rico and the U.S. Virgin Islands.

The bureau took sides with 69 requests for review from private schools in Puerto Rico along with 22 appeals by schools and libraries elsewhere in the United States. It sent all the matters back to USAC for resolution. "USAC must give applicants a reasonable period of time in which to provide requested information," it said regarding the continental U.S. cases.

Some two years ago, E-Rate was wracked by congressional and state/federal law-enforcement investigations into waste, fraud, abuse or misuse of funds in what amounted to a minority of the funds allocated. Indictments, convictions and disqualification of service and systems vendors have occurred in some instances; Congress has pressed the FCC and USAC to clean up the mechanism's oversight and enforcement.

The schools and libraries segment - authorized by the Telecommunications Act of 1996 - is the second largest USF disbursement following the long-standing high-cost segment for rural carriers. Individually, they account for a much greater portion of outlay than the rural healthcare and low-income segments do combined (refer to the table in our recent report on USF's 4Q06 contribution factor featured in the Sept. 16 Telecom Policy Report).

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