November 1998 Announcements

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With the first wave of funding commitment decision letters now arriving in applicants' mailboxes and the second wave fast approaching, the Schools and Libraries Corporation offers two very important clarifications for filing Form 486, the next step in the E-rate process.  Click here to read these clarifications, which are found in the Reference Area in the "486 Guidance" section.

NOTICE IS HEREBY GIVEN that a meeting of the Board of Directors of Schools and Libraries Corporation shall take place at the Ronald Reagan International Trade Center, 1301 Pennsylvania Avenue, NW, Washington, D.C., on December 15, 1998 beginning at the hour of 9:30 a.m. local time. At the meeting, the Board of Directors will consider and vote upon the Agreement and Plan of Merger by and among Universal Service Administrative Company, Rural Health Care Corporation and Schools and Libraries Corporation.

The Schools and Libraries Corporation announced today that the first wave of funding commitment decisions letters is now on its way to E-rate applicants across the country. Approximately 3,000 letters have been sent, committing a total of $73 million for this first wave. The wave includes applicants from every state and the District of Columbia. Letters notifying these applicants’ service providers of their funding commitments will follow shortly.

As expected, those applicants included in the first wave represent a mix of requests for discounts on telecommunications services and Internet access at a variety of discount levels, plus some internal connections requests at the 90% discounts level. One in four dollars in the first wave is going to schools and libraries at the highest discount level, while one-third of the commitments are to rural applicants.

Each wave of funding commitment decisions letters is formed based on Federal Communications Commission rules of priority plus completion of all SLC processing and decisions on specific Form 471 applications. The FCC rules designate as "priority one" all approved telecommunications services and Internet access requests received within the 75-day window, followed by in-the-window requests for internal connections at the 90% discount level. Funds have been set aside to meet these priorities for every application received within the 75-day window, and will remain earmarked through the final wave. (For more information about the funding commitment process, see "20 Questions (and Answers) About the ‘Waves,’" on the SLC Web Site at www.sl.universalservice.org or via fax-on-demand, 800-979-0833, document #208.)

Applicants who receive funding commitment letters in the first wave are urged to submit, within five business days, Form 486 for services that are already in place. This five-business-day turnaround is strongly recommended, since no invoices to SLC for E-rate discounts can be paid until the relevant Form 486 has been approved. Form 486 is enclosed with the funding commitment decisions letter, as is Form 472, the Billed Entity Applicant Reimbursement form. Letter recipients in the first wave seeking reimbursement for services previously received may file as soon as possible for services received through September 30, 1998, and must file a BEAR form by December 31, 1998. For more information about Forms 486 and 472, see the Web Site and fax-on-demand service. Procedures for making necessary corrections/changes to information included in the funding commitment decisions letter will also be available very soon via Web and fax.

The second wave of funding commitment decisions letters is expected to be released in December, followed by additional waves before the end of the calendar year. The final waves will be issued in January.

Demand for the E-Rate

In the first funding year’s 75-day application window, the SLC received over 30,000 E-rate applications from schools and libraries requesting more than $2.03 billion in discounts for services being received in 1998. Applications were filed from schools and libraries, large and small, rural and urban, rich and poor. The SLC is finalizing its review of these requests for discounts and anticipates that total requests will be approximately $2.3 billion.

Service Type/Discount Level

The requests for discounts are for all three kinds of eligible services – telecommunications services, Internet access and internal connections. Public and private schools, and public libraries from every region of the country, reflecting a geographically and economically diverse applicant base, have applied to participate in the E-rate. Their level of discount is determined by the number of students who qualify for the National School Lunch Program.

Overview of E-rate Requests

The SLC received 30,000-plus applications for discounts in the 75-day application window. These requests for discounts on services received in 1998, when adjusted for the 18 month funding period established by the FCC in June, result in an estimated demand of $2.6 billion. Nearly one fourth of the discount dollars requested is sought by the neediest schools and libraries, and over half the discount dollars are sought for those qualifying for the top two discount bands: 90%, and 80-89% discount rates. The average discount request is for $69,200. And, 70% of applications seek less than $25,000 in discounts.

CHART I

First Wave

The first wave of E-rate commitment letters consists of over 3,000 funding commitment decision letters, committing over $73 million in discounts. Applicants in every state and the District of Columbia will receive an E-rate letter in this first wave. Over 25% of the funds committed in the first wave are for services for the neediest schools and libraries: those with at least 75% of students eligible to participate in the school lunch program.

The first wave of letters includes commitments to applicants at every economic level seeking discounts on priority one services: telecommunications and Internet access. "Priority one" services account for 80% of the funds committed in this wave of letters. Additionally, applications seeking discounts on internal connections at the 90% discount level are included in this first wave.

CHART II

Applicant Type

The profile of funding commitments in the first wave generally parallels the requests nationwide, with the exception of funding for libraries whose applications account for 3% of total dollars requested, but just 1% of funds committed in the first wave. SLC review of library applications for program compliance started slowly due to the special issues associated with discount calculations for libraries, many of which cross school district lines. These reviews are accelerating and the balance is expected to shift, beginning in waves two or three.

CHART III

Rural/Urban

Applicants in rural areas are well represented with one third of the dollars going to schools and libraries in rural communities.

CHART IV

On Monday, November 23, Vice President Al Gore & Education Secretary Richard Riley will announce the first discounted telecommunications services provided to schools & libraries nationwide as a result of the E-rate. With the start of E-rate discounts & the next installment of the Department of Education's Technology Literacy Challenge Fund to states, schools & libraries across the country will be able to connect young people from all walks of life -- urban, suburban, & rural areas -- to the power of the Information Age. This announcement will be webcast live on Monday at 10:30 a.m. (ET) through the Department of Education's Web Site: http://www.ed.gov/

Click here to read 20 questions and answers for understanding the "Waves" of the Funding Commitment Decisions Letters.

This week, the Schools and Libraries Corporation (SLC) passed two major milestones on its path to issuing funding commitment decision letters to E-rate applicants.

First, on November 4, the SLC received – on the subject of its internal control design for achieving the SLC’s stated program and internal controls objectives -- an unqualified opinion from its independent auditor, PricewaterhouseCoopers.

Second, the SLC wrote to the FCC Chairman William Kennard affirming that it had implemented the recommendations issued from the General Accounting Office (GAO) in July 1998. These recommendations -- steps to take before issuing a single commitment letter – included:

1. To conduct detailed reviews of a random sample of E-rate applications to assess the overall effectiveness of program integrity, and undertake corrective actions if necessary;

2. To finalize procedures, automated systems and internal controls for the post-commitment process, including funds disbursement;

3. To obtain a report from independent auditors that finds the SLC has developed appropriate internal controls to mitigate against waste, fraud and abuse.

In response, FCC Chairman Kennard wrote to the GAO stating that he was "satisfied that the GAO recommendations have been substantially met by SLC."

With completion of these milestones, SLC will launch the process of issuing funding commitment decision letters. The SLC anticipates beginning to mail funding commitment letters the middle of this month and that the notification process will continue over several weeks. The SLC will provide a timetable for the waves of funding commitment letters after the first wave has been issued.

In light of this timetable, the SLC is still evaluating the timeframe of the application window for the next funding year. The 80-day window is scheduled to open on December 1, 1998 and close on February 19, 1999.

As the SLC moves forward, it will continue to update applicants and vendors.