A Blog About Current Issues in White Collar Defense
Getting Started with E-Rate
Public schools and libraries in the U.S. can save a lot of money on Internet service by applying for the Schools and Libraries Program, a federal subsidy better known as E-Rate.
E-Rate funding, capped yearly at $3.9 billion, helps eligible institutions cover costs of Internet service. Participants can save anywhere from twenty to ninety percent of their Internet expenses—the precise amount being dictated by the economic standing of both the participating institution and the school district where it is located.
E-Rate and three other programs are part of the Universal Service Fund (USF), a system of subsidies born out of the Telecommunications Act of 1996 as a way to ensure affordable telecom rates across the country. Although the Federal Communications Commission (FCC) oversees the USF, the fund is managed by a nonprofit corporation called the Universal Service Administrative Company (USAC).
Detailed information on how to apply for E-Rate can be found in the Schools and Libraries Program overview. Basically it works as a bidding process. An applicant fills out FCC Form 470, requesting specific services, and submits it to the USAC. The USAC then issues an RFP for telecom providers who want to bid for the requested services. After 28 days, the applicant can study the bids. When it selects one, it requests E-Rate funding by filing FCC Form 471 within a deadline set by the FCC (for FY2016 it is May 26).
The discount rate is generally determined by the size of the population, in the applicant’s school district, that qualifies for the National School Lunch Program. The applicant must also file Form 486, listing services for which funds are requested and ensuring compliance with the Children’s Internet Protection Act.
There are limits to what E-Rate can cover. The applicant is solely responsible for end-user equipment, like hardware and software, and also for any non-discounted portions of Internet services.
While it is a great opportunity to save money, E-Rate isn’t a free-for-all. To discourage abuse and misuse of the program, the FCC requires applicants to comply with a series of rules, notably:
- Compliance with state and local law. It’s not enough to follow the FCC standards only.
- Applicants cannot seek discounts for services not requested. In other words, services listed on Form 471 must match (or not exceed) services requested on Form 470.
- Fair, competitive bidding. Applicants are responsible for ensuring an open, fair, and competitive bidding process to select the most cost-effective provider.
- Document retention. Applicants must save all competing bids for services to demonstrate they selected the most cost-effective bid, with price being the primary consideration. Records should be kept for at least ten years after the last date of service delivered.
- CIPA compliance. Applicants must confirm compliance with the Children’s Internet Protection Act, which requires schools and libraries that receive federal funding to employ Internet filters that protect children from harmful content.
In spite of these rules, the wealth of funds in the E-Rate program can attract abuse. In response, the FCC created the USF Strike Force in 2014 and tasked it with combatting waste, fraud, and abuse of the USF programs. Federal agents have shown that they are serious about investigating alleged abuses. One widely publicized case in Ramapo, NY, recently led to several raids. We will look at that case and others like it in upcoming posts.