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Wednesday, July 16, 2014

Still too close to free

How much did we save by cutting the top discount for C2 to 85%?  How much more would we have saved by cutting it down to 80%?  We can only estimate, because we don't know how the new district-level discounts will play out (will most 87% applicants become 90% or 80%?).  But you can use this spreadsheet to come up with your own estimate.  I based my calculations on all applicants at 87% or higher becoming 90% applicants, while 86% or lower dropped to 80%.

So based on my assumptions, dropping the top discount to 85% saved  $52,063,763.  Dropping the top to 80% would have saved twice that much.

In my mind, there is no way that saving $52 million was worth the hassle of creating a second discount level.  It will probably cost that much just to add the necessary functionality to Block 4 of the online Form 471.  Wait a minute, USAC only has 6 months to add that functionality to the Form 471, and don't they have to wait for OMB approval?  What will we do if the new form isn't ready?  And they also have to add in the 20% drop in the discount level for voice services.  Except my VoIP comes bundled with my bandwidth, so my service provider is going to have to apply two different discounts to different parts of that one charge.  And are PRIs digital transmission, since they are just a channelized T-1, or are they voice, since the only application I've ever seen is for voice; can I get funding for the T-1 if I can cost-allocate out the channelizing?  Except that because of telecom regulations, the wholesale price of a T-1 is lower if voice travels across it, so my cost allocation might result in the eligible cost being higher than the actual cost.  And what about analog data circuits?  They are data transmission, but not digital transmission.  What discount level do they get?  And if voice equipment is being phased out, do I take the 20% decrease off the new 85% discount for C2?  Now I have 4 discount levels for each 90% applicant.

Wait, where was I?

Oh yeah.  $52 million saved at the expense of a considerable complexity added to the application process.  Not a good buy.

On the other hand, this could be the camel's nose that will eventually lead to an across-the-board drop in the top discount level to 65%, like over at the Rural Health Care program.  If the top discount were 65%, we'd save  $682 million, just for C2 (using the $150/student cap).  But more important, we wouldn't need all the stupid rules that are only necessary because 90% is too close to free.  And so is 85%.

1 comment:

  1. Ooh, in paragraph 85 of the 7th Report & Order:
    "we reduce the maximum discount rate only by five percent and only for category two services as a first step."

    "As a first step"! 65%, here we come!