2015 USF E-rate Modernization Prepared by: Triple R Consultants MAEDS PRESENTATION October ©Triple “R” Enterprises, Inc. All Rights Reserved

Overview  The FCC has legal authority to adopt changes to the Telecommunications Act  Effective beginning with Funding Year 2015 and beyond  Less emphasis on Telecommunications services  More emphasis on Broadband connectivity  Modernization Order has three main goals Triple R Consultants “Think Wi-Fi”

Three Main Goals:  Ensuring affordable access to high-speed broadband sufficient to support digital learning in schools and robust connectivity for all libraries.  Maximizing the cost-effectiveness of spending for E-rate supported purchases.  Making the E-rate Application process and other E-rate processes fast, simple, and efficient. Triple R Consultants

Goal 1: Ensuring affordable access to high-speed broadband sufficient to support digital learning in schools and robust connectivity for all libraries.  The Priority 1 and Priority 2 names are changed to Category 1 and Category 2, respectively  Category 1 Funding: $2.3 billion per year  Category 2 Funding: $1.0 billion per year  Existing Reserves and Category 1 Phase-out: Est. $4.0 billion ( )  The maximum Category 2 discount level has been changed from 90% to 85%  Each school district is required to calculate and use a single district-wide discount rate rather than calculating and using building-by-building discount rates  The level of poverty must be based on the percentage of the student enrollment that is eligible for a free or reduced price lunch under the NSLP  Urban vs. Rural classifications for applicants may be changed by the FCC based on the most recent Bureau of the Census data Triple R Consultants

Goal 2: Maximizing the cost-effectiveness of spending for E-rate supported purchases.  Each eligible school or school district is eligible for a budgeted amount of Category 2 (C2) support over a five year funding cycle.  Discounts for Category 1 (C1) voice services shall be reduced by 20% off the applicants discount percent level for each funding year starting in FY2015 and reduced by an additional 20% each subsequent funding year.  E-rate support/funding is eliminated for some (C2) components that had previously been on the Eligible Services List (ESL).  Exempt from the 2-5 rule, Basic Maintenance of Internal Connections includes only those services that maintain equipment supported/funded by E-rate.  New competitive bidding rules to increase pricing transparency to help schools and libraries find the best prices for E-rate eligible equipment and services. Triple R Consultants

DISCOUNT MATRIX % w/20% LEGACY SERVICE PHASE OUT *2018 UrbanRuralUrbanRuralUrbanRuralUrbanRural 20=025=520=025=020=025=020=025=0 40=2050=3040=050=1040=050=040=050=0 50=3060=4050=1060=2050=060=050=060=0 60=4070=5060=2070=3060=070=1060=070=0 80=60 80=40 80=20 80=0 90=70 90=50 90=30 90=10 Voice Services: local telephone services, long distance telephone services, plain old telephone services (POTS), radio loop, 800 services, satellite telephone, shared telephone services, Centrex, wireless telephone service such as cellular, interconnected voice over internet protocol (VoIP), and the circuit capacity dedicated to providing voice services. *Absent further consideration by the FCC, the phase down will continue for Funding Year 2018 Discounts for Category One voice services shall be reduced by 20% off the applicants discount percent level for each funding year starting in funding year 2015 and reduced by an additional 20% each subsequent funding year. Triple R Consultants

Goal 3: Making the E-rate Application process and other E-rate processes fast, simple, and efficient.  USAC Efficiency: Requires the modernization of USAC’s E-rate Information Technology systems including publishing of all non-confidential E-rate data in open, electronic formats.  Directs USAC to prioritize the review of E-rate applications from state and regional consortia applicants.  Instructs USAC to issue funding commitments and/or denials for all “workable” funding requests by September 1 st of each funding year even though any non-recurring (C2) services may begin on April 1 st prior to the July 1 st start date of the funding year  Applicant Burden: Requires less administrative burden for applicants and service providers?  Eliminates the technology plan requirement for applicants seeking (C2) E-rate funding beginning FY2015  Must “cost allocate” out the ineligible (C1) voice services from the pre-discount amount of the eligible service  Less E-rate funding to claim in future years = less administrative burden Triple R Consultants

Goal 3: Making the E-rate Application process and other E-rate processes fast, simple, and efficient.  Multi-Year Contracts: Applicants are required to submit a Form 471 for the first year of a multi-year contract and will be permitted to use a, yet to be determined (TBD), streamlined application process.  A multi-year contract for Category 1 services must be for five years or less and competitively bid at least every five years.  Applicants that are presently in a multi-year contract must submit a Form 471 in FY2015 and use the (TBD) streamlined application process for the remaining years of the contract.  Signed Contract Requirement : Applicants may have a signed contract or other legally binding agreement in place prior to submitting their Form 471.  Internet Access Exemption: An applicant that seeks support for commercially available high-speed Internet access services for an annual pre-discount amount of $3, or less, including any one-time installation and equipment charges, is exempt from the competitive bidding requirements.  FCC Waivers: Encourages applicants to file waiver requests to the FCC for the purpose of seeking E-rate support for establishing direct connections between eligible schools and libraries. Triple R Consultants

New competitive bidding rules to increase pricing transparency to help schools and libraries find the best prices for E-rate eligible equipment and services.  Price Transparency: USAC must make publicly available on its website information regarding services and equipment purchased by school and libraries  Applicants may opt out of this public disclosure requirement only if a specific law, rule, or other restriction bars publication of the purchasing price data.  Master Contracts: In addition to filing a Form 470 to competitively bid eligible products and services, the applicant may also choose to purchase products and services on a, yet to be determined, “preferred” master contract designated by the FCC without filing a Form 470.  The Wireline Competition Bureau (WCB) may exempt preferred master contracts from the FCC Form 470 filing requirement, so applicants purchasing equipment from a preferred master contract may do so without filing an FCC Form 470.  (WCB) may require applicants to include services available on a preferred master contract in their bid evaluations, even if the preferred master contract was not submitted in response to the applicant’s FCC Form 470.  (WCB) may enact either or both of these exceptions and may designate a preferred master contract only if the contract offers eligible entities nationwide the opportunity to obtain excellent pricing for equipment used in category two internal connections. Triple R Consultants

Goal 3: Making the E-rate Application process and other E-rate processes fast, simple, and efficient.  Electronic Filings: Requires E-rate applicants and service providers to file all documents with the USAC electronically and requires USAC to provide all notifications electronically.  Invoicing: Beginning with FY2016, applicants who submit a BEAR Form for reimbursements may now receive payments directly from the USAC.  Record Retention : Applicants and Service Providers must retain all documents related to the application for, receipt, and delivery of supported services for at least 10 years.  Appeals : Beginning with FY2015, applicants are required to first file appeals of USAC decisions with USAC itself before seeking FCC review.  Waste, Fraud and Abuse: The newly created USF “Strike Force” will coordinate with the FCC’s Office of Inspector General, the U.S. Department of Justice, and other law enforcement agencies to prosecute unlawful conduct. Triple R Consultants

Each eligible school or school district is eligible for a budgeted amount of Category 2 (C2) support over a five year funding cycle.  Budget Amounts : Each eligible school or school district is eligible for (C2) support up to a pre-discount amount of $ per student over a five- year funding cycle  The (C2) budget amount includes any other applications filed by the applicant, or by other organizations on their behalf, such as consortia  Applicants can request more than their C2 budget amount, however, the commitment/reimbursement amount will be capped based on the school’s budgeted pre-discount amount  Five Year Funding Cycle : Each eligible school or school district is eligible for a total available budget less any support received in the prior four funding years  Excludes any support received prior to FY2015  Resets the 2-5 rule dates  Funding Floor : Each eligible school or school district is eligible for (C2) support up to at least a pre-discount amount of $9, over a five-year funding cycle Triple R Consultants

Beginning FY2015, E-rate support is eliminated for some Category 2 (C2) components that had previously been on the Eligible Services List while other (C2) components are added.  Funding Year 2017 & Beyond: Any eligible school or school district that did not request (C2) funding for FY15 or FY16, is eligible for (C2) support, except basic maintenance, no more than twice every five funding years  Eliminated C2 Services: Circuit cards/components; interfaces, gateways, antennas; servers; software; storage devices; telephone components, video components, as well as voice over IP or video over IP components, and the components, such as virtual private networks, that are listed under Data Protection other than firewalls and uninterruptible power supply/battery backup.  Additional C2 Services: Caching Servers are now eligible under Category 2 products and services.  Basic Maintenance of Internal Connections: Includes only those services that maintain equipment supported/funded by E-rate.  Includes managed Wi-Fi services for E-rate Purchases  Exempt from the 2-5 rule  Part of the 5 year applicant budget Triple R Consultants

Recommendations  Plan ahead and think Wi-Fi deployments in the next 1-5 years  Identify needs for Category 2 services implementation within the 5 Year Budget Cycle  Adjust Telecommunications budgets for legacy services phase-down beginning 2015  Comply with all other E-rate rules that are still in effect such as competitive bid requirements  Continue to monitor any amendments and upcoming changes to Forms related to the E-rate Modernization Order (14-99)(DA:13-184) Triple R Consultants

Questions & Answers Triple R Consultants