Debate ends on E-rate eligibility of GPS data transfer

Stephane Babcock | Associate Editor

After months of phone calls, e-mails, explanations, documentation and discussion, the great E-rate debate has come to an end, for now. To some companies’ joy and others’ despair, the Universal Service Administrative Company (USAC) recently answered a question during a training session in New Orleans that many have argued for and against.

'“According to Eric Flock (services review program manager in the Schools and Libraries Division) it is not eligible at this time,” replied a USAC staffer in an e-mail to School Transportation News, referring to the data transfer fee related to cellular global positioning systems on school buses.

History of E-rate Debate
To fully understand the implications of this response, one needs to take a step back and review the history of E-rate and the eligibility of certain services. E-rate, also known as the Schools and Libraries Program of the Universal Service Fund, was spawned by the passage of the Telecommunications Act of 1996. The money is distributed to qualified U.S. schools and libraries to help acquire inexpensive telecommunications and internet access. USAC, a not-for-profit corporation, administers the federal Universal Service Fund as designated by the Federal Communications Commission (FCC).

The recent boom in the GPS/automatic vehicle location (AVL) industry in relation to school buses has become a feeding frenzy for numerous companies vying for school bus GPS contracts. These bidding battles, especially those for large-scale bids like Chicago and New York City, can sometimes come down to the penny. One of the many decisions involved concerns the choice to use either a cellular band or a radio bandwidth to transfer bus location and other GPS-related information back to a district’s transportation department.

“What we’re looking at is what the ultimate cost is, not how we get there,” said Linda Farbry, director of transportation for Fairfax County Public Schools (FCPS) in Virginia.
FCPS’s request for proposal (RFP) deadline for the installation of GPS systems on its approximately 1,600 school buses was scheduled for the first week of October. After constructing towers around the county to deliver the information via the UHF band during a pilot program and realizing the reception was not adequate, FCPS decided a cellular solution was its best bet. By choosing to go cellular, FCPS will have to pony up a monthly data transfer fee, which can add up quickly.

“Even five bucks a month (per bus) turns out to be a heck of a lot of money over the course of the year,” said Farby.

“There’s a trade-off between cell and radio,” said Dave Pettine, vice president of sales and marketing for Everyday Wireless. “Cell offers greater coverage, but it comes at a higher price. It’s up to the district to decide how they value that trade-off.”

A Grey Area
The eligibility of the GPS data transfer fee has always been clouded by loose interpretations of USAC’s Eligible Services List, which is released each year. Some companies and school districts have translated certain parts of the “Internet Access” section of the 2007 list to include this GPS-related cellular cost.

“What is eligible and what is not eligible changes every year,” said Dan Riordan, president of On-Tech Consulting, Inc., a company that aides schools and libraries with the E-rate application processing. “The 2008-2009 list has not been released yet. But it was open for comment recently, and two different cellular companies submitted the suggestion to the FCC that they should include these GPS application fees.”

One E-rate specialist at a major telecommunications company noted that if there was ever any question concerning a service’s eligibility, it would be cost-allocated out of the total charge.

“It’s a very specific question that we asked the FCC. We’re still waiting for this year’s final eligibility list to be released to the public, so I’m surprised they made such a broad conclusion,” said the source in response to the USAC statement.

Some speculate that this latest definition will also affect the way GPS installations are bid by manufacturers, which have used the idea of E-rate eligibility as a selling point but, in the end, skirt the issue.

“Sometimes they’ll just say that it’s E-rate refundable, but instead of making them put in for the refund they’ll just knock it off the monthly charge in the contract,” said an industry source, who wished to remain anonymous.

Kris Hafezizadeh, assistant director of transportation of Austin Independent School District, was told by a vendor at a recent conference that the services would be E-rate eligible and was surprised to find out differently.

“If they write something like that in their RFP, they need to stand by it,” said Hafezizadeh. “But, we wouldn’t make a decision until we double check and triple check that all the ducks are in a row. We check to make sure they are giving us correct information. If some company wants to pull my leg like that, I wouldn’t do business with them anymore.”

“Prospective pupil transportation clients should thoroughly familiarize themselves with the issue, as the resultant interpretation would undoubtedly influence vendor selection,” said Bill Brinton, Zonar’s director of marketing.

Consequences of Misinterpretation
Some industry experts warn that school districts should be wary of applying for refunds for this type of service, citing the possibility of later audits and fines for receiving a rebate for an ineligible service.

“They could get into a lot of trouble over this,” said a representative from a telecommunications products and services company.

According to USAC, if the district does not knowingly apply for an ineligible service, they would only have to return the money that way refunded in the first place.

“The FCC could (fine districts) if there was some kind of fraud going on, I suppose,” said a USAC representative.

According to a FCC spokesperson, he was not aware of any incident where the commission had imposed that kind of fine on a school district.

GPS Companies React
The one saving grace for some companies offering a cellular option to school districts was the possibility of the service being eligible for E-rate refunds. Now that a definitive answer has come from USAC, some companies are surprised by the outcome.

“I’ve heard that other companies are saying that it may be eligible, but our position on it has always been cautious ... by no means have we ever said it is eligible,” said Brad Bishop, chief operating officer for Synovia. “It’s unfortunate. I know that school districts would benefit from it being E-rate eligible. It stands to reason that it should be. I would hope that districts that are using the systems would speak up about it.”

“If you have a radio solution, this ruling has no impact,” added Everyday Wireless’ Pettine. “There are a lot of districts out there that have GPS initiatives that would prefer a cellular solution, but this may persuade them to pursue a UHF radio-based system.”

For others, USAC’s answer is nothing more than a solidification of their position.

“Zonar has been unwavering in the belief that cellular communication fees for GPS are ineligible for E-rate reimbursement,” said Brinton. “We have also felt that the assertion by certain GPS vendors that these fees were somehow eligible was a willful and self-serving contravention of both the spirit and intent of E-rate funding. One has to question whether or not a wireless carrier could be complicit in perpetuating this convenient myth.”