Over the past couple of weeks, USAC has published new eligibility guidance for applicants and service providers who have requested E-rate discounts for web hosting services. We appreciate USAC’s updated guidance and support efforts to further clarify what types of products and services qualify for E-rate discounts.
Having so said, it seems that there is still a large amount of confusion among the E-rate community when it comes to web hosting eligibility. Because of this, we would like to offer the following tips based on our interpretation of the latest guidance from the SLD.
1. If you’re hosting anything other than your organization’s public website, the charges are probably ineligible.
Over the past few years USAC has continued to emphasize a distinction between application hosting and web hosting, the former being defined as access to applications which are delivered over the web (using HTTP), and the latter as hosting a website of the applicant’s own creation. Hosting services for your school or library’s homepage should be eligible for E-rate discounts, while web-based application services such as student information systems, curriculum providers, and file storage/backup systems are ineligible for funding.
2. If your web hosting service provider is helping you generate or publish any content, a cost-allocation will probably be required.
Many service providers offer feature-rich hosting solutions which include back-end interfaces to assist customers in generating content for their websites. Some vendors provide simple HTML templates, while others offer software that allows customers to build and design web pages, create blogs, podcasts, and rich media pages, and other cool features. While this content generation software can be extremely useful, it is currently not eligible for E-rate discounts. As such, if your web hosting service comes with these features USAC will require a cost-allocation of the fair value of these features from the charges associated with the hosting service itself.
3. Your organization’s public website can have password-protected areas.
USAC’s recent guidance explains that hosting charges for password-protected web pages are now eligible for E-rate discounts. This means that if you have a protected area on your website (say contact information, a faculty directory, or other sensitive information that is only accessible by parents or guardians), no cost-allocation will be required for the hosting service that serves these pages. This can be a little tricky to understand, especially with USAC’s use of the term “intranet” as an eligible hosting service. Remember, there is a difference in password protected content on your website (teacher contact information which is only accessible by parents who have a username and password) and access to a web-based “portal” or student information system which requires a login (better classified as a web-based application.)
4. You should ask your service provider for a detailed explanation of the cost-allocation mechanism used for your web hosting service.
Many hosting service providers simply provide applicants with an eligible percentage: “our Super-Cool Hosting Service for Schools is 76% eligible for E-rate discounts.” While it is likely that the service provider has worked directly with USAC to arrive at an acceptable eligible percentage, you should request a detailed analysis of the cost-allocation method they used for your records. At a minimum, it should detail the features of the service that have been identified as ineligible and the associated cost(s) with each. If your web hosting funding request is audited in the future, auditors will likely request the detailed analysis to ensure that the claimed eligible percentage was accurate.
5. Print out a copy of the updated web hosting eligibility guidance for your records.
As anyone who has been through a recent E-rate audit will tell you, document retention is critical. Because USAC’s recent eligibility clarifications are not included in the Funding Year 2009 Eligible Services List, we highly recommend retaining a hardcopy of the News Brief(s) where the updated guidance is located. If you request funding for hosting services which include password-protected pages, you could be required to provide justification for the eligibility of the service during the course of an audit in the future.
If you have requested E-rate discounts on web hosting services for Funding Year 2009, you will be given a chance to modify your funding request(s) in accordance with the updated eligibility guidance during PIA review. If you submitted a cost-allocated funding request, contact your hosting provider to see if they have an updated cost-allocation now in order to save time once PIA review gets underway. And as always, document every step of the process so that if you are audited in the future you will have a clear picture of what transpired. Hopefully, USAC will continue to issue guidance and clarification that will help all E-rate stakeholders determine “fair and reasonable” cost-allocations for complex services.
