E-rate Amortization Cap Suspension Update

E-rate Amortization Cap Suspension Update

On January 31, 2019, the FCC issued a Notice of Proposed Rulemaking (NPRM) extending the Amortization Cap suspension first put into effect in 2015.

Prior to the 2014 Modernization Orders that transformed the E-rate program, all up-front, non-recurring costs over $500,000 had to be amortized over the life of the contract including items like construction costs for new fiber-optic circuits. This created a barrier for districts and providers from upgrading prior to 2015. The Modernization Orders suspended this cap and clarified the rules governing special construction of fiber optic networks, which ushered in the recent success in upgrading the connectivity at so many of the country’s schools.

The suspension of the amortization cap rule was set to expire for the coming E-rate Funding Year 2019 until last week’s announcement. This would have had a dampening effect on the efforts of districts seeking to upgrade their networks, as vendors would be less enthusiastic to bid on large, ambitious upgrade projects for remote schools if they could not receive full payment upon completion of the work.

Further, the NPRM indicates that the FCC is leaning towards eliminating the amortization cap rule entirely by Order, and calls for comments on this topic from the public. Comments are due on March 1st, 2019, and can be sent electronically via the FCC’s website: http://apps.fcc.gov/ecfs/.

EducationSuperHighway applauds the FCC’s action in support of the effort to get every school in America connected and encourages the education technology community to write to the FCC in support of the elimination of the rule.