FCC Grants Waiver of E-rate Category 2 Services 2-in-5 Rule
On November 4, 2020, the Wireline Competition Bureau issued an Order granting a waiver of the E-rate “2-in-5 rule” filed by several school districts (Petitioners). Under the 2-in-5 rule, which was in effect from FY 2005-2014, E-rate applicants could receive internal connections discounts only twice every five funding years for each location.
While the Bureau emphasized that E-Rate program applicants are responsible for familiarizing themselves with any applicable regulations so that they can ensure full compliance with E-Rate program rules, the Bureau granted waiver requests for the Petitioners because the Petitioners relied upon an incorrect USAC tool and guidance.
Specifically, to aid compliance with the 2-in-5 rule, USAC created an online tool (2-in-5 Tool), which allowed applicants to determine in which funding years individual entities were eligible for internal connections discounts.
In its decision, the Bureau found good cause to waive the 2-in-5 rule because Petitioners reasonably relied upon USAC’s online 2-in-5 Tool to determine eligibility for internal connections discounts in funding years 2010 and 2011. In addition to the Petitioners’ reliance upon USAC’s tool, the Bureau noted that USAC’s website and trainings did not clearly describe the application of the 2-in-5 rule. As a result, Petitioners believed they were in compliance with the E-rate program rules. Although the Bureau cautioned that applicants should not rely on informal guidance from USAC that contradicts Commission rules or policy and that the Commission can enforce its rules when an E-rate stakeholder receives advice from USAC that is contrary to a Commission rule, the Bureau concluded that these special circumstances warranted a waiver of the rule and that a waiver would serve the public interest.
The Bureau compared the situation here to the Commission’s decision granting a wavier for Pribilof School District in 2018 (Pribilof was represented by Broadband Legal Strategies in that appeal).
Pribilof received an inaccurate response generated by USAC’s electronic filing system (E-Rate Productivity Center or EPC), leading the school district to reasonably believe its application would be considered for funding by USAC despite being filed late. Because the notification reasonably appeared to be legitimate, and given complications arising from the rollout of EPC, the Commission said it could not fault the school district for relying on what appeared to be a formal acceptance notification it received through EPC from USAC regarding its specific funding application. Like in the Pribilof order, the Bureau here found that a waiver served the public interest because Petitioners thought the Tool provided accurate information.
The Bureau also found that the USAC contradictory explanations in explaining how the rule worked in trainings and directed applicants to the inaccurate tool from the explanation page on USAC’s website. Further, the Bureau noted that the 2-in-5 rule violations all occurred during the first five-year cycle when applicants were unfamiliar with the new rule and how it worked.
