Vancord CyberSound Podcast

E-Rate & School Reimbursement Funding

Managing and funding the operations of internet infrastructure in schools can be a difficult task. The Universal Service Program for Schools and Libraries, better known as E-Rate, exists to help make it easier for these entities to get the equipment and services they need at an affordable price.

Today, Jason is joined by the CEO of E-Rate First, Joseph Pillo, and Owen Black from Vancord to reveal the E-Rate process and the benefits of applying for this program.

CyberSound ep68

Episode Transcript

This is CyberSound, your simplified and fundamentals-focused source for all things cybersecurity, with your host, Jason Pufahl.

Jason Pufahl 00:12
Welcome to CyberSound. I’m your host, Jason Pufahl, today, joined by two special guest stars who are experts in E-Rate. We’ve got Joe Pillo from E-Rate First and Owen Black from Vancord. Guys, thanks for joining, I appreciate it.

Joe Pillo 00:29
Thanks for having us.

Expand Transcript

Owen Black 00:31
Thank you.

Jason Pufahl 00:31
So E-Rate’s, clearly, E-Rate obviously has been around for a long time, and Vancord has, I think, a variety of clients that have taken advantage of the program to fund some of their infrastructure or bandwidth related activities. But I’m confident there are a lot of people who just aren’t familiar with the program, aren’t really familiar with kind of what benefits it might have for their business, and where they might be able to use it. So, we brought Joe on today, to speak a little bit to sort of an overview, an overview of you know, what is E-Rate? I’m sure you could probably talk for a long time, Joe, but maybe if we can spend a few minutes on, you know, that sort of executive summary for folks to give people a perspective.

Joe Pillo 01:16
Excellent, excellent. Yes, it’s one of those things, I don’t want to bore you guys with this, with the nitty gritty, every little detail about this, but it was put in place by the Clinton Administration, signed into law based on the Telecommunications Act of 1996. And it was to provide telecommunications to schools and libraries nationally, that was part of that law. And it’s actually called The Schools and Libraries Program of the Universal Service Fund. It’s better known as the E-Rate. So, that’s where we are now. It’s the largest tech funding source nationally for schools and libraries. It’s about $4 billion now, it’s tied to inflation index per year and it’s um, it’s not a tax, it’s a public password. So it’s a big thing, you actually pay the telecommunication providers, your cell provider, if you look at your bill, you pay a fee, a dollar a month everyone does, you’ll see the USF charge. And that goes into the big pool that all schools and libraries get back funding. And so this funding is a reimbursement program, so they get back 20 to 90% of their eligible cost. And this will be tied to their poverty levels. Usually schools use their free and reduced lunch figures where they do an assessment, but most schools usually get 40%, super high need inner city will get 90% back. There’s two types of service, one being category one, and you got to think of it as internet access and infrastructure, its transport to the building. So that’s category one, the costs associated with that transport of internet and internet costs, that’s that’s that piece. The Category Two is internal connections, managing internal broadband services, and basic maintenance. And that’s the equipment delivering that access from the building to the end user, the student staff, whatever it may be. And so that’s the eligibility and this goes through an application process, various forms, and it’s based on bidding. So that’s a quick 101 of just the basic E-Rate, it’s, hey, it’s a great thing, it was to expand internet out west where they did not have connections there on the dial up, it was to increase that to get high speed, really T1 networks back in the day, to get off dial, get on T1, and to subsidize those build outs for those different vendors to get out there and put in fiber and connect those last kind of mile locations really out west where it wasn’t connected.

Jason Pufahl 03:48
So, maybe a couple of questions come to mind for me. Is it specifically for education? Like for example, is it for state/local government at all? Or is it purely, say, K-12 or high schools?

Joe Pillo 04:01
Great question. It depends on the state, but it’s mostly K-12. In the state of Connecticut, Juvenile Justice, Head Start, and early pre-K if it’s a nonprofit is eligible.

Jason Pufahl 04:14
Okay. And you, I think you had mentioned, you know, say internet connectivity, and then you say associated cost for the in, say, in building equipment. Can you be a little more specific about the types of things that this would cover?

Joe Pillo 04:28
Yeah so obviously, internet comes into the building at a demarc. You gotta go to a firewall, the firewall is eligible, cabling, any drops, routers, switches, wireless access points, any internal controllers, racks and UPS’s. That’s kind of the base stuff that’s eligible under category two; the actual physical equipment, or if it’s cloud based, that’s also eligible that way too.

Jason Pufahl 04:56
Okay. And here’s a term that I’m not really familiar with. And maybe maybe you’re already batting it around. But, I know that you know, MIBS, or MIBS is one of the, it’s kind of one of the acronyms that is prevalent in E-Rate, can you describe what that means?

Joe Pillo 05:12
Oh, that’s really the growth though, it’s been added recently, last couple of years. It’s Managed Internal Broadband Service. A lot of smaller schools and libraries don’t have the staffing to hire someone, put them on staff to manage a lot of this stuff, or they need a specialty, someone, experts in like that specific product. So you could actually hire a company and there’s really three ways of doing it. You can say the entity, the school, we always call them entities, or library is an entity, right? They own the equipment, and they need someone to manage it, to replace it, to fix it, to configure it, whatever it may be, that would be fall under MIBS. Or they may say, hey, let’s purchase new equipment, that would be eligible also. And then, the third part, would be if they lease the equipment, full service lease, managed service, to a third party, to put it in, you know, manage it, maintain it. And after the leases end, they actually would take it back or replace it with a new set of equipment.

Jason Pufahl 06:19
So really MIBS is an acronym that simply describes everything that you outlined in your executive summary, essentially, right, the broadband capabilities, the infrastructure piece, and the management of that.

Joe Pillo 06:30
Any managed service. So like, if you’re managing a firewall, you can manage a switch, it can be you know, the wireless access points, it can be the cabling, all those can get managed by a third party, and those costs can be offset by the E-Rate. So, for now that a lot of schools don’t know this, but they’re paying someone a third party, and they’re, hey, it’s X dollars a month for this and they don’t realize they can get an E-Rate in through the program and get whatever discount they get back on that cost.

Jason Pufahl 06:56
So then, really, if somebody’s currently paying a managed service provider, or maybe a security provider of some sort, is there any negative to applying for E-Rate funds for that, because if you’re already paying, you might have the added benefit of getting some reimbursement as part of that rather than starting from scratch and not knowing exactly what you’re getting back?

Joe Pillo 07:19
Yeah, I mean, it’s, it’s difficult, because in the application cycle, there’s not a difference of filing a 200 dollar application, and 2 million dollar application. So that goes back to the staffing thing, who on the staff is gonna go through the process of being able to like, hey, we know we have eligible costs, I heard I can get it E-Rateable, how do I go about getting that funded, so I can get the money back on that stuff I’m already paying for? This is a great way, you know, if they educate themselves, they learn about the program a little bit. Or, if they hire a consultant, that they can go about, you know, getting that return on that stuff that they already paid for.

Jason Pufahl 07:29
So Owen, and I know that you have a variety of clients that have taken advantage of E-Rate. Out of curiosity, has it been primarily for equipment purchases? Has it been for the management piece? Leased? Is there any trend that you see in terms of the interest of the direction people like to go with this?

Owen Black 08:16
Well, interestingly enough, Vancord started, you know, about 20 years ago, in building and supporting networks, and probably have a very, I don’t know, what the percentage is in terms of K-12 practice, but it’s significant within the organization, and exactly what Joe describes, we can supply equipment to and support and as as the company has matured, so have our offerings. Okay, so we can provide, we can provide the bandwidth if needed from almost any carrier, we can provide the equipment that the network equipment, but we kind of like to stay with the companies that we’ve chosen to represent, and install and use. And, and along those lines, we’ve had success with equipment. And we’ve just started having success in terms of the MIBS piece supporting them, even though we’ve been doing support contracts outside of this for 10 plus years. So, as the company has matured, so have our offerings, and quite honestly, so have our clients because what Joe says, it’s an amazing, E-Rate is an amazing tool. And there are also a lot of people on both sides, customers and suppliers like ourselves, trying to play in that arena. So it’s, it is an interesting decision as to how you approach your customer set.

Joe Pillo 09:55
Oh, and it’s also based on budgeting a lot out of the business, you know, you have the technology department, and then the in the business department, right the financials. They like that fixed cost a lot of times that’s then E-Rate eligible. So they’re not hit with the, hey, I gotta buy equipment every three to seven years, because then it throws off the budget, you know, tech department goes to them and says, “Hey, I need seven new switches.” That can be a huge cost that they then were not anticipating in their budget. So, by having it as a managed service, a lot of times you’re able to project your budget, you’re able to fix that budget, and know that it’s on the vendor a lot of times to replenish and replace that piece of equipment so you have the state of the art equipment without having to have that, you know, upfront large scale costs, or even license fees against that.

Owen Black 09:59
Absolutely. And interestingly enough, the Vancord’s of the world and the E-Rate First’s of the world are we have to kind of exist at arm’s length. But the education that somebody like Joe Pillo can provide a customer, only aids the efforts that we make, because many of our customers, as an example, are not familiar with the fact that they can, that they can use a MIBS sort of approach. They think it’s got to be equipment, and installation, and then they pay someone else to support it, whether it would be internal to that, you know, school, or whether it would be external to somebody like ourselves.

Jason Pufahl 11:29
Yeah, I mean, it’s hugely compelling. One of the things that we’ve talked about, I think, at least twice on the podcast has been challenges with getting you know competent or qualified IT and security support. So, a lot of a lot of K-12, right, certainly a lot of our clients in general, have turned to that outsourcing model. And if they can get some of the cost defrayed through the MIBS, the MIBS portion of E-Rate, I mean, I can see that I can see where that’d be a hugely compelling thing for, for a lot of these sort of, you know, these educational clients that we have.

Joe Pillo 12:01
It does help with the one throat to choke type of thing, too. If they’re putting in the equipment, they’re supposed to manage it. The client, the business department is not getting, the tech department’s not getting a phone call on the weekends that something’s not working, they don’t have to run out and fix it. They have the company that’s supposed to do it, they’re managing it, and they go out there, it’s a big benefit when that happens.

Jason Pufahl 12:23
So Joe, can you speak, then, for a minute, on what the process would be to apply, you know, either for the MIBS portion, or even for the hardware portion, or what does the application look like?

Joe Pillo 12:35
Yeah, it’s it’s not like taxes, where you file once a year, right, based on rules. You have to go through a bidding scenario. So whatever it may be, internet, you know, equipment, managed services, you got to go out to bid. So it gets you ploy, you file a form, and it goes into this EPC portal, E-Rate Productivity Center, they call it, and it goes online and all vendors nationally, it’s all public information, they can see information, and they all can see it. So they can respond and submit a bid based on that, that almost pseudo RFP. You can also put a formal RFP against it, which we do a lot of those, but you could post it on there, vendors have a minimum of 20 days to respond to that posting. And then once that happens, the entity then evaluates those bids, makes the decision, signs agreements, and then files the form. The next form is actually the application, you’re requesting service reimbursement on that service. So you’re stating, hey, I chose this vendor, this price, this term, right? Just like anything else, that’s the application. Then, after you submit that, within that window, that deadline window, you then you go through an audit phase defending that application, what’s eligible, you know, is the school eligible, the student counts, identifying your budget, that gets approved. You then have to file a form to accept that approval. And then the last piece is really, you then once cost incurs, you file reimbursement filings to release the money. So it’s projecting in front end, and then based on actual you’re getting the reimbursement on the backside, and you can get set up as getting credit against your bill, or you get it as an ACH deposit into your account.

Jason Pufahl 14:20
For for the entity who’s reviewing the, the RFPs if you will, do they simply have to select the lowest bidder or can there have other qualities?

Joe Pillo 14:32
Yeah, great question. It’s, um, you have to, it’s gotta be the lowest, so price has to be the primary factor, but it’s not the only factor.

Jason Pufahl 14:41
So service can factor into that?

Joe Pillo 14:42
Yeah. So your bid assessment, you know, you have a template, a basic bid assessment, and hey, we’re, we’re putting prices 30% of the award. Then you have maybe local vendor, previously worked with, you know, different factors on that list that you can have and, um, will they implement all different things on there you can have. And then, you know, based on that criteria, you flush out why you chose that vendor. A price has to be, that’s what they audit really is to determine that, hey, did you evaluate the pricing against each other properly, but doesn’t mean that the, you know, lowest or highest bidder wins or loses the actual, you know, award.

Jason Pufahl 14:42
I think, Owen, maybe you had a question?

Owen Black 15:26
Yeah, not a question so much, just a little clarification. When they, what, what the Vancord’s in the world are supposed to be doing during the year and during the evaluation period. The bids come out, so to speak with the language of, or equivalent or, okay, so if someone is a Cisco shop, and you represent somebody like Ruckus, you’re allowed throughout the course of the year to try and point out the differences in the products and to try and shift possibly that that entitie’s network from one equipment manufacturer to the other. The interesting piece, when you get to the MIBS sort of arrangement is they’re just basically asking the entity for the function to occur. And for it to be properly supported. And it’s, it’s, I think it’s an it’s an interesting nuance.

Joe Pillo 16:22
Yeah, they were, obviously the whole process being bid on being open and fair, right? So you’re bidding stuff, all vendors can respond to, you evaluate based on that, you choose which vendor makes the most sense for you, for that next year’s application, and you have to file every year just like taxes, right? You have to bid it or state, you already have a contract from previous year on that. So if they did sign a three or five year MIBS contract, they don’t have to bid that every year, they just got to reference that original bid on the application. So that’s helpful, just like internet access contracts, you’re able to bypass at least that first bidding phase, if you do award a multi-year contract.

Jason Pufahl 17:02
But there is the requirement to have an application annually, even if you have a multi-year support agreement with a vendor.

Joe Pillo 17:09
Correct, you’re going to point back and say, hey, I’m still requesting reimbursement based on our bid last year, which is contracted for three years that we assess properly under the original bid. So that’s what you’re posting on that. So every year no matter what, what they have, they still have to request that reimburse that, you know, reimbursement for service.

Jason Pufahl 17:27
So, I would imagine that for folks who are listening who might not have taken advantage of E-Rate in the past, and you’ve referenced taxes now a couple of times, there’s probably an E-Rate application season. What are typical dates for this?

Joe Pillo 17:41
Yes, unfortunately, we’re in it now. It just started, it’s there, 470 is really the first form, that’s that bidding form, we’re posting those now. So we’re going over every entity that we have that we consult for, we’re reviewing what they posted last year, confirming with them what they what what they have is still in place or went forward with, and then going over them their wish list or worst case scenario list, things they need to purchase, or possibly would like to purchase next year. So then we flush those out and that’s part of that bid. So we go through that. And then now we’re going to be bidding stuff. And like I said, it has to stay open for a minimum of 28 days before they can go to that next phase of, hey, this is who won the bid or, you know, assessing the bids.

Jason Pufahl 18:27
Perfect. I mean, it seems pretty straightforward. And it certainly seems that it’s a large pool of money. Obviously, it’s available nationally. But there is a lot of money there. It clearly sounds like it’s needs based. So there’s probably some, you know, through the application process, right, maybe, maybe some aspect of trying to determine how much of an award you get,

Joe Pillo 18:49
That’s a great point, right now, so all internet access, whatever your certain cost and internet costs are you’re going to get that base year, whatever the discount percentage you get, you’re going to get that back, that’s guaranteed you’re going to get that back, you’re eligible, you should expect that every year. Right? And on the category two side, they have a five year budget. And right now it’s $167 per student pre-discount budget. So, you know, if you have 10,000 students, you know, it’s $176 per student, you know, if you have 10,000 students, and so that’s your budget to be used in over a five year period. You can use it all in one year, you can spread it out, you’re not obligated to use any of it, but that’s what your max allocation is. Now there is a floor, a lot of smaller schools, there’s a fourth $25,000 pre-discount. So if you have, I think it’s less than like 67 students, that school can have $25,000 and this is where like an E-Rate consultant can sometimes helps is like if you have say 10 schools, your Pre-K or Head Start, and your 10 schools and only have 12 each, well you could identify each school as a $25,000 instead of a pool of all the students you have together. So, you’re kind of worried to budget will be much higher on the pre-discount wise. So it’s a calculation.

Jason Pufahl 20:06
Okay. Owen, any kind of parting thoughts here?

Owen Black 20:10
Yeah, the one thing I’d be interested to ask Joe is what reasons do you find that that entities do not file for E-Rate?

Joe Pillo 20:19
Difficult, they don’t know how to start, they’re unsure of the cost, they don’t know where to turn. It’s not like, you know, you can just go down the street and see like a tax accountant and see H&R Block there. And so usually, you know, they get it from a referral from their other, you know, if they hire a consultant from their local other district or school that they’re, you know, friendly with. But some, you know, if they’re only getting back $1,000, and that’s projected, if someone asked me, you know, we always do a free assessment, and we go over and say, hey, look, you should expect, based on your costs, you’re only expecting $1,000. Sometimes it’s not worth filing, because of the time, even if, internally, we’re outsourcing, it wouldn’t be worth the effort. But once you start getting into, hey, I need equipment, I need managed service, I’d like to go fiber, then you almost have to. It’s a shame if they don’t. A lot of private schools don’t, because they don’t know how to go about doing it and they’re nervous that somehow the Feds going to look at their books or something like that. So that was always a stopgap, but all K-12 schools and libraries 99% file.

Jason Pufahl 20:22
But private schools are eligible, so it isn’t just public. Okay.

Joe Pillo 21:30
If the state recognizes them as a K-12, then they’re eligible. And that’s just what we should say with like, the Catholic schools in the past. They’re separate entities, so a lot of them didn’t want to do it, or they weren’t driven to do it, like the school districts were. And but it’s definitely a it’s a great avenue to get a good amount of funding, and you can actually detail off before you do it, what you should expect back.

Jason Pufahl 21:56
Well, guys, we’re up against our time. I sincerely appreciate you joining today. It sounds like there’s money available. And for folks who are listening who haven’t taken advantage of E-Rate in the past, if you’ve got questions, feel free to reach out to us at CyberSound, Owen Black at Vancord, or Joe Pillo at E-Rate First to get additional information. We can help to steer you in the right direction and hopefully enable you to take advantage of some of the funds that are available to you. Joe, Owen, sincerely appreciate you joining today and everybody.

Owen Black 22:30
Jason, thanks for having us.

Joe Pillo 22:32
It’s been great.

Jason Pufahl 22:33
You’re welcome. I hope everybody got value out of this. I appreciate you listening. Thank you.

We’d love to hear your feedback. Feel free to get in touch at Vancord on LinkedIn or on Twitter Vancordsecurity. And remember, stay vigilant, stay resilient. This has been CyberSound.

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Joseph Pillo, Owen Black

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