1. Rex Miller, CFO Education Networks of America, Inc. May 20, 2015 Status Report on Ongoing Reforms E-Rate Program – Vendor Perspective

2. Goals Per FCC, 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 FCC has made broad changes to meet these goals – it will likely take years to determine (1) what changes really occurred and (2) their impact on service delivery to schools and libraries

3. Category 1 Services Broadband services relatively unchanged in 2015-2016  Eligibility for applicant owned networks in 2016  FCC believes dark fiber will improve both availability and pricing 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 »Some voice service features

4. Category 1 Services Is there enough funding?  Additional E-Rate funds make it possible for program to meet anticipated needs  Phase-out of voice and elimination of certain other funding has dramatic effects on the local budget  Applicants have to find local money to pay for voice services previously funded by E-Rate and additional money to match the new E-Rate funds –It may take several years for local budgets to adjust to E-Rate changes Will Dark Fiber/School Built Networks increase access to High Speed Broadband?  Additional flexibility in the rules may attract more vendors  Will these vendors build in currently underserved areas for E-Rate customers?  Does the availability of E-Rate funding in a slightly new manner tip the scale for last mile broadband delivery?  Does this option force innovation/expansion more quickly than what the marketplace is already doing?

5. Category 2 Category 2 – Internal Connections $1 B target for internal connections  Order 2.1 guarantees the $1 B target each year –Unclear whether FCC will use more than $1 billion in 2015 – 2016 if applicants demand more  This not just Wi-Fi  Shortened list of eligible items –Routers, Switches, Wi-Fi –Basic maintenance of eligible items Even if schools/libraries have Wi-Fi, they still get C2 $ for basic maintenance, routers, switches, etc. for LAN

6. Category 2 Use of E-Rate Funds for Key Infrastructure is a major improvement  1 to 1 and Bring Your Own Device initiatives are driving need for high quality connectivity to the end user – not just to the building  Demand for C2 funding bears watching as many school systems did not wait for E-Rate before funding Wi-Fi and other Internal Connections

7. Goal 2- Maximizing Cost Effectiveness Adopt Cost Transparency to share cost and connectivity data  Item 21 Data now public  Applicant level data more revealing  Aggregated data appears difficult to interpret –Multiple categories and description types –Conformity unclear –Quality of data other than total cost Encourage Consortia Purchasing  General emphasis – limited specific steps Emphasize Lowest Corresponding Price

8. Goal 2- Maximizing Cost Effectiveness Orders place significant emphasis on cost effectiveness  New guidance or rules do not appear to be adopted  Marketplace has historically driven down costs over time –Will FCC allow competitive bid process to lead or will regulatory oversight increase  Value of consortium contracting –Does blended pricing mean lower pricing –Does consortium address value of local providers Order indicates that quality is important in addition to just price  Will FCC allow that balanced approach to continue  Increased reliance on Broadband in the classroom requires reliable service consistent with current “Most Cost Effective” guidelines  No rule changes noted to Most Cost Effective guideline nor any new guidance on evaluation criteria for E-Rate service competitive bids “New” Item 21 Data – how will FCC/USAC use that data to meet this goal  Nationwide data on existing services vs broadband to unserved/underserved areas  Last mile service costs vary widely

9. Goal 3 – Making E-Rate Fast Simple and Efficient Streamline application process  SLD goal – all workable applications approved by 9/1  Tech Plan eliminated Simplify discount rates  District wide rate – not school by school  CEP option method available  Rural/Urban – now using Census Data Simplify invoicing/disbursement  BEAR payments direct to applicants – 2016 Protect against fraud, waste and abuse  Increase Document Retention to 10 years

10. Goal 3 – Making E-Rate Fast Simple and Efficient Most reform changes were to implement other program goals  Much of the gains for Goal 3 are expected in future years  Multi-year 471s, BEAR payment simplification, etc During the recent filing window, dramatic changes led to significant increases in average time to complete forms  Days not hours to complete  We expect deadline waiver requests will be much larger than previous years  Applicant behavior (and consultant behavior) seems to be a major cause for issues – USAC systems seemed to function better than in prior years – despite being all new  Will experience with new forms increase efficiency in future years? Document Retention  The increase to ten years will likely create many additional hardships on applicants  Making sure applicants have adopted this new standard is something that all interested parties should promote

11. What’s Next? Efficiency and Focus of PIA process  How did the Orders get implemented at the USAC PIA staff level?  Much of those “marching orders” are not disclosed Timing of E-Rate approvals  Impact on C1 approvals  When will C2 approvals start – historically second in line Dark Fiber Rule Changes 2016 - 2017  Ability for applicants to build own fiber –Must bid out all options before selecting “build”  Certain flexibility in paying for fiber builds  Potential for states to contribute and get E-Rate match Preferred Master Contracts  Expected in 2015 – none completed  To be used for C2 only More SLD/FCC oversight possible  Technical assistance and other involvement