Out of the Gate Early- E Rate 2006

1. Out of the Gate Early-E Rate 2006 Program History and OverviewApproved Program RevisionsHow to look up Leads in your AreaComstor Selling Tools for the Education Market

2. World’s largest “networking and telephony only” channel provider • Vendor-focused, convergence (video, voice and data solutions) distribution strategy • Industry leader of branded, value-added services and support programs • Presence on every continent with 1,200+ people strong • Worldwide headquarters in Tarrytown, NY, U.S.

3. Comstor Corporate Mission • Corporate Principles • Make our customers more successful than their competitors • Be a significant contributor to our vendor’s success • Continuously evolve and improve our internal effectiveness and efficiency • Profitability driven – earnings first, revenue second • Corporate Goals • Deliver profitable solutions to the channel • Align infrastructure to meet market conditions • Evolve value-add business model to meet customer needs • Maximize resources to gain efficiencies and increase productivity throughout supply chain • Assure long-term viability of customers • Most important of all: • We have no mechanism to sell anything to end users, • We can only succeed by making our partners more successful!

4. The Comstor Approach to Vertical Market Penetration Industry Expertise • Branding of the Comstor Vertical Edge Programs • Strong Industry Association Affiliation and Participation • Government Agency Expertise • Connecting Partners with Established End-users Partner Services • Trade Show Representation • Lead Generation Services • Solutions Based Proposals • Training via Classroom, Web and Teleconference • One Stop Reference and Lead Center via the Comstor Web Site • End-User and Reseller Presentations to Drive Demand • Seminar-in-a-Box Presentations for Partners Helping Close the Business – with Services to Help Revenue Growth • Special Pricing and Financing • Industry leading million dollar plus demo rooms for hands on demonstrations • Strong Pre-Sales and Post-Sales Support from Design to Installation to Staging to Financing • Participation in Our Industry Leading GSA Program

5. The Telecommunications Act of 1934 Universal Access for every American is born Every residence in America should have access to a phone A levy of a few cents is added to metropolitan phone bills to pay for rural access infrastructure The Telecommunications Act of 1996 Universal access for Schools & Libraries is born Expanded Universal Service from low income and rural telephone service to schools, libraries and rural health care facilities Discounts on Interstate & Intrastate telecommunication services Includes advanced telecommunications and information services From Universal Access To E-Rate

6. America’s Promise To Our Children: “In our schools, every classroom in America must be connected to the information superhighway with computers and good software and well trained teachers by the year 2000.” President William Jefferson Clinton State of the Union Address January 1997

7. The Telecommunications Act of 1996 A Vehicle For Schools & Libraries to: Acquire and pay for POTS Connect To The Internet Discounts on: Telecommunications Services Internet Access Internal Connections - (Networking & Telephony Infrastructure) Estimated Cost: $13,000,000,000 Estimated Time to complete: 5 Years (E-Rate is now an ongoing Federal Program) Funding is set at $2.25 Billion per year

8. E-Rate is Primarily a K-12 Opportunity There are 119,235 K-12 Schools in the US Public – 91,833 Private - 17,410 Religious - 9,992 99% of them are now connected 92% of all “instructional rooms” are connected City Schools 88% Towns 96% Rural Areas 93% *There are now more classrooms with Internet access than telephones source: NCES 2004-011 January 2004

9. Cumulative National Data Year 2003 • Funding Year “5” - July 1,2002 to September 30 2003

10. Demand By Year - Service Type & Total Requested(How much do they want and what do they want to do with it?) * Numbers are in thousands of dollars

11. Funding Approvals By Year By Discount Level *Remember that ALL requests for phone bill money and ISP money are approved “off the top”, and for us, percentile brackets are only important to hardware or priority two opportunities.

12. Who Is Eligible for E-Rate Monies? K Through 12 Schools • As defined by The Elementary & SecondaryEducation Act of 1965 • Must be Non-Profit • Must Not Have An Endowment Exceeding $50 Million Libraries • As Defined By The Libraries Services & Technology Act • Must Be Eligible For Assistance Under The LSTA • Library Must Be Funded As An Individual Entity Multi-School Consortiums • Consortia can only include Eligible Schools & Libraries

13. What Must Schools Do To Participate? Schools Must Have An Inventory Assessment Schools Must Have A State Approved Technology Plan Schools Must Fill Out The Required Applications Funds Must Have Been Budgeted And Approved to pay for the non-subsidized portion of the requested services, connections, and hardware.

14. Discounts on all Purchases (We’ll talk separately about what the word “discount” means in this context.)

15. Discounts on all Purchases – What Does That Mean? • Telecommunication Services • Each school and library in the country has been assigned a “discount rate”. This was established by taking the number of free hot lunches distributed every day in that school, and dividing that number by the entire population of the school. • Telecommunication Service funds are “guaranteed money”. All Telecommunication Services funding comes off the top of the annual $2.25 Billion allocated to E-Rate. • In other words, if a school fills out the paper work, they are guaranteed the money. • Internet Access • Each school and library in the country has been assigned a “discount rate”. This discount rate was established by taking the number of free hot lunches distributed every day in that school, and dividing that number by the entire population of the school. • Internet Access funds are “guaranteed money”. All funding for Internet access comes off the top of the annual $2.25 Billion allocated to E-Rate. • Again, if a school fills out the paper work, they are guaranteed the money. • Internal Connections • Internal Connections funds are distributed in a different manner. Due to the huge demand in funding, monies are allocated by a needs basis. In the past this has meant that only the neediest schools, those in the 90 percentile bracket have been guaranteed to receive funding. New revisions to the E-Rate which go into affect this year will change that.

16. Connectivity Services POTS Long Distance service Cable Wireless Satellite ISDN T1 Other “high bandwidth” services * voice messaging Eligible Services and Products • Networking Hardware • Wiring • Routers • Switches • Hubs • Network servers • System software • Wireless LANs • Voice Over IP • Private Branch Exchange • Firewalls You can download a free updated eligible services and products guide at: http://www.sl.universalservice.org/reference/eligible.asp

17. personal computers FAX machines modems/cable modems NICs asbestos removal cameras electrical wiring teacher training curriculum software televisions electrical upgrades training content consultants printers monitors air conditioning information services Ineligible Services and Products

18. Eligible Services and Products - Revision • Pursuant to the FCC’s Second Report and Order (FCC 03-101, released on April 30, 2003), the Schools and Libraries Division (SLD) is instituting a pilot program to create a database of products eligible for funding as Internal Connections. Manufacturers will be able to post their eligible products to the database to assist E-rate applicants in their selection of Internal Connections products. • Enrolling manufacturers must have a Service Provider Identification Number (SPIN). • Please refer to slides 10 and 11 for information on how to apply for a SPIN. https://slpin.universalservice.org/mfpin/EPDPublic/PublicInterface/Search.aspx

19. https://slpin.universalservice.org/mfpin/EPDPublic/PublicInterface/Search.aspxhttps://slpin.universalservice.org/mfpin/EPDPublic/PublicInterface/Search.aspx

20. What Was the Ysleta Decision? • The Schools and Libraries Division has supplied directions to those school districts that will be permitted to re-bid their contracts for the 2002 E-rate funding year as a result of the Federal Communications Commission's recent Ysleta decision. • As a result of that decision, a small number of large school districts and a consortium will be permitted to re-apply after the FCC decided that based on the SLD's approval of the application of the El Paso Independent School District in 2001, the districts might have concluded that the bidding practices they followed were permissible under E-rate program rules. The Ysleta, Donna, Galena Park, and El Paso school districts in Texas, the Navajo Education Technology Consortium and Albuquerque School District in New Mexico, the Oklahoma City school district in Oklahoma and the Memphis school district in Tennessee will be permitted to reapply, based on appeals that the districts and/or IBM filed with the FCC. Additional school districts that had appealed their rejections to the SLD first will also be permitted to re-apply, but the SLD has not yet publicly announced the names of those districts. The applicants will not be permitted to re-apply for discounts for services that they already used, particularly telecommunications services or Internet access. The SLD's instructions noted that the "total amount of money" that the applicants seek in their new applications "cannot exceed the amount of pre-discount funding" that they had originally sought. "More specifically, no applicant can receive funding in excess of the amount for which you originally applied in each individual funding request," the SLD told the applicants. It was unclear how the FCC intended to evaluate that.The SLD specified that the determination of eligibility would be based on the list of eligible services for the 2004 funding year. An SLD staff person said the applicants were supposed to use their discount rate information from the 2002 funding year.

21. E-Rate Year 2005 Major Change – “2 in 5” 2 in 5 …..We conclude that each eligible entity may receive commitments for discounts on Priority Two services, except as discussed below, no more than twice every five funding years. The practical effect of this rule will be to permit applicants to receive funding once every three years for internal connections, as supported by the record, but will allow applicants to obtain internal connections in two consecutive years as part of a staged implementation of internal connections. In order to give applicants sufficient planning time, we conclude that this rule will become effective beginning with support received in Funding Year 2005. Commitments for Priority Two services received in years prior to Funding Year 2005 will not be considered in determining an applicant’s eligibility to receive support for Priority Two services. *This ruling does not affect services, just hardware

22. E-Rate Year 2005 Major Clarifications • TRANSFER OF EQUIPMENT • The FCC prohibits all transfers of equipment for a period of three years after purchase.  Three years or more after purchase, such equipment may be transferred, but not in consideration of money or anything else of value.  Also, in the limited circumstance when the location where the equipment was originally installed is temporarily or permanently closed, the equipment may be transferred to another E-rate–eligible entity even if that entity does not have a comparable discount level. • SERVICE SUBSTITUTIONS • In the past, services for which a service substitution was requested could not result in an increase in price.  Service substitution requests may now substitute an eligible service with a higher pre-discount price, although USAC will only provide support based on the lesser of the pre-discount price of the original service or the substitute service. • PROHIBITION ON FREE SERVICES • Applicants must pay the entire undiscounted portion of the cost of any services they receive through E-rate.  The value of all price reductions, promotional offers, trade-in allowances, vendor discounts, and "free" products or services must be deducted from the pre-discount cost of services indicated in Funding Requests.  Costs, trade-in allowances, and discounts must be fairly and appropriately derived.  A proportionate cost allocation is required between eligible and ineligible components. • The provision of unrelated free services by the service provider to the applicant constitutes a rebate of the undiscounted portion of the costs, a violation of the FCC’s rules.

23. CIPA- The Children's Internet Protection Act And the Federal E-Rate Program • School & Library Internet Filtering Mandated by Law - HR 4577 • All Public Schools must filter content against pornography • All Public School Libraries filter content against pornography • Schools must be in compliance by October 31, 2004 • Schools not in compliance with CIPA will lose all Federal Funding http://www.whitehouse.gov http://www.whitehouse.com

24. CIPA- The Children's Internet Protection Act • A number of schools have been required to repay some E-rate discounts they received because they were not in compliance with the requirements of the Children's Internet Protection Act by the date they were supposed to be. The situation came to light in mid-January as a result of petitions filed by Verizon Network Integration Corp. and Verizon-New Jersey with the FCC.According to the Verizon appeals, the Morris Catholic High School in Denville, NJ, and the Queen of Peace High School in North Arlington, NJ, had certified that they were in compliance with CIPA when they sought discounts on Internet access for the E-rate funding year that started on July 1, 2002. In the case of Morris Catholic, the SLD determined that they were not in compliance until August 12, 2002, and required them to return $526.05 in discounts received on Verizon services. In the case of Queen of Peace, the SLD found that they were not in compliance until January 14, 2003 and required them to return $1,036.27.The Verizon petitions were focused on the FCC's Commitment Adjustment procedures, not CIPA per se. So-called COMADs require service providers to reimburse the Universal Service Fund for disbursements made in error or when rules are violated and then to seek restitution from their customers. The service provider community has long objected that this, in effect, turns service providers into the E-rate program's debt collectors. The FCC recently asked if there were any circumstances in which this requirement should be waived and Verizon argued that service providers should not be required to recover funds from applicants when there is no evidence that the service provider was at fault. It argued that Verizon had no way of knowing that the schools had not met the CIPA requirements by the start of the funding year. An SLD spokesman said that the schools were contacted in the course of the review of their Form 486 applications because of "discrepancies" in the certifications they had made for 2001 and 2002 funding year requests. In 2001, recipients of E-rate discounts for Internet access and internal connections were required to certify that they were "undertaking" compliance with CIPA, which was passed in December 2000. By July 2002, these applicants were expected to be in full compliance unless they could qualify for a waiver because of delays associated with state and local procurement requirements. Applicants that seek discounts solely for telecommunications services are not subject to the CIPA requirements.

25. Understanding the Process: Paper FlowFor further details, see: http://www.sl.universalservice.org/applicants/processflow.gif Applicant Describes needs Form 470 is filed (December 14)* Posted for 28 days at SLC Web Site Vendor Chosen & Form 471* is Filed (by February 17) 66 day window in 2004/5 to finish 28 day process - spec, bid and select vendor Customer notifies SLD to pay you Form 486 is filed Services Commence Installation or delivery begins (by following 9/30) SLD notifies both School & Vendor of approval (starting in July)

26. The SLD Website

27. http://www.sl.universalservice.org/vendor Note the navigation bars

28. Downloading State Summary Reports

29. Click on orange “Service Providers” bar

30. http://www.sl.universalservice.org

31. Download Form 470 Summary Files Top of page Bottom of same web page

33. Tip: Open in Word, Landscape View

34. Looking Up Individual Applications

35. Scroll down the page to Site Help, then click on Site Map

36. http://www.sl.universalservice.org/overview/sitemap.asp On the Site Map page, scroll down to bottom, to where it says “Service Providers.” Click on “Search Form 470 Applications.”