April 2019 Recap
On April 27, 2019, USAC released its first wave of FY2019 Funding Commitment Decision Letters. This wave contains funding decisions on more than 18,500 applications and more than 24,000 of the Funding Request Numbers (FRNs) featured in those applications. More than half of the applications that were filed in the window received a funding commitment decision from USAC within 30 days of the window close. As of April 27, the FY2019 commitments total more than $530 million.
USAC is required to file an annual report with Congress and the FCC by March 31, to provide a summary of USAC’s operations, activities, and accomplishments of the prior year. Highlights from the 2018 Annual Report include:
Disbursements for USF programs increased in 2018: USAC collected more than $8 billion from contributions to support the four USF sub-programs in FY2018. The increase in disbursements resulted from:
- The High Cost Program increased disbursements to support hurricane relief efforts in Puerto Rico and U.S. Virgin Islands.
- FCC’s March 2018 high cost order provided $180 million in one-time funding. The high cost programs disbursed a total of $4.8 billion in 2018.
- The RHC Program funding cap increased from $400 million to $571 million.
E-rate and Lifeline program disbursements did not experience significant changes in FY2018.
Rural Health Care Program 2018 Highlights:
- Total gross demand increased 17.4 percent from FY2017.
- USAC cleared four times more appeals in 2018 compared to 2017 but did not say how many appeals were cleared.
- USAC implemented program changes from the FCC’s 2018 Funding Cap Order. The Order increased the funding cap to $571 million and added annual adjustments for inflation. The increased funding was applied and distributed to previously prorated FY2017 commitments. Additionally, the Order allowed unused funds to be carried-forward for use in future funding years.
E-rate Program 2018 Highlights:
- Received 35,000 applications for $2.77 billion. Issued decisions for 43 percent of applications within 30 days of the filing window closing. USAC also noted it had committed $1 billion for 18,000 applications by the beginning of June.
- Average review time for appeals is currently under 75 days.
- New vendor took over call center operations on June 1, 2018. USAC’s move to two consolidated program call centers resulted in $2 million in cost savings annually.
- The transition of Business Processing Operations vendors, from Solix to Maximus, resulted in $65 million in savings over the next 5 years.
On April 1, 2019, USAC estimated the demand for E-rate services at $2.896 billion for Funding Year 2019. This estimate includes $1.91 billion for Category 1 services and $985 million for Category 2 services. USAC calcuated this estimate based on the total amount of funding requested in Form 471 applications received by the close of the FY2019 filing window. Nearly 36,000 applications were submitted in window. Applications filed within two weeks of the deadline but that will likely be granted a waiver were not included in the report.
A table showing estimated demand by service type and discount band is available here. Nearly 46 percent of the C1 requests were made by applicants in the 90% and higher discount category.
USAC filed its Semi-Annual Audit Report with the Commission on April 1, 2019. The report summarized outstanding audit findings as of February 28, 2019. The report noted that there were:
- 21 beneficiary audits older than six months with a potential recovery of $15.6 million. The recovery process is underway, but notification letters have not been issued for these audits.
- 14 beneficiary audits held in abeyance because an appeal of USAC’s recovery determination is pending with USAC. The potential recovery is $6.5 million.
- 73 beneficiary audits held in abeyance because an appeal or waiver of USAC’s recovery determination is pending with the FCC. The potential recovery is $19.6 million.
- 39 audits without payment or a satisfactory arrangement for payment of debt. To date, USAC has transferred $10.3 million to the Treasury Department related to these audits.
On March 26, 2019, Chairman Pai circulated an NPRM seeking comment on a funding cap for the entire USF program. It has been reported that the NPRM does not propose any cuts or reach a tentative conclusion in favor of a USF cap but is simply seeking comment on such a proposal. The NPRM is not public because it is not scheduled to be considered at a Commission agenda meeting.
Commissioner O’Rielly wrote a blog post on April 2 in support of an overall cap on the USF. O’Rielly asserted a cap is crucial because the Commission has repeatedly raised the budgets of the four USF sub-programs without offsetting spending elsewhere. A cap would force the Commission to carefully consider the cost-effectiveness and consequences of raising a USF program’s budget on the entire USF, he said. O’Rielly argued that adopting a cap would not preclude the Commission from voting to raise the cap in the future, but it would force the Commission to carefully consider such increases. O’Rielly also pointed out that the NPRM’s proposed budgetary cap of $11.42 billion is well-above current disbursement levels, leaving a $2 billion cushion for future increases.
In response, opponents criticized the proposed USF cap arguing it will increase the digital divide and harm consumers.
At this point, the NPRM has not been made public. A public draft will be released if the NPRM is placed on the Commission’s monthly agenda for a vote. The NPRM must receive three votes to be approved and released. Even after the NPRM’s adoption, any process to establish a cap would take time. The Commission is required to solicit and accept public comments on the proposed rule before adopting a final, new rule.
