First wave notes

During the slow times at the booth here at NECC, I've been playing with the data from the first wave for 2005. I've found nothing of any real significance, so here are some factoids of no real significance.

• Every state got some funding except Oklahoma.
• Almost 5400 different applicants were approved.
• 19,978 FRNs approved, 1304 FRNs denied. Leaving 80% of FRNs undecided at the start of the funding year.
• Top funding recipient: LAUSD, $11.5 million. Remember, that's just Priority One. I feel better about my phone bill now.
• Second and third: the Utah Education Network ($4.8 million) and the Alabama Super Computer Authority ($3.3 million); they run the statewide networks, and had 132 and 140 FRNs, respectively. Just think, if you spent 10 mins. per FRN typing up the 471, it would take you over 20 hours total.
• Smallest FRN: $76.
• State with most funding approved: California, with over $25 million. Least funded state: Nevada, $69,000. Well, as mentioned above, Oklahoma got $zero.

Note: numbers include only states, not funding for DC, Puerto Rico, Guam, etc.

How the E-Rate will be killed

When I first heard about the FCC determining that GovGAAP accounting standards should be applied to the USF, I thought: "If I wanted to kill the E-Rate, I'd move the fund into the treasury. Applying GovGAAP rules to the fund would be the first step." I thought I was just being paranoid.

Then came the GAO report on the E-Rate, which said that having the fund outside the Treasury was creating many problems.

The CBO (Congressional Budget Office) released a report saying that the economic impact of Universal Service would be less if it were simply taken from general revenue, rather than as a user fee.

It was starting to sound to me like a campaign to get the E-Rate into the Treasury, funded by income tax. That would spell the eventual death of the fund. As it stands now, the government's alternatives are E-Rate or no E-Rate. Once it's in the treasury, then the E-Rate is one of many priorities, and Congress has to choose: E-Rate or Medicaid, E-Rate or the war in Iraq, E-Rate or NCLB. Eventually, E-Rate funding would dwindle and vanish.

It turns out I wasn't being paranoid. On April 12, Congressman Joe Barton (R-TX), chair of the committe overseeing the E-Rate, said in a speech: "If I can't kill it, I'm going to do everything I can to so underfund it that it goes away."

Where's the lowered max discount?

It occurred to me that there is a reform not mentioned in the NPRM: lowering the maximum discount to something below 90%. This reform was proposed years ago by the Task Force on Waste, Fraud and Abuse, has been supported in past NPRMs by all commenters except the 90%-discount districts, and has been widely expected to become policy some time soon.

Let's hope that it's not in this NPRM because the FCC plans to make it a policy before the end of the comment period (almost 6 months from now!).

Formulaic funding: good or evil?

Formulaic funding looks to be the big issue of discussion among the commissioners, with the camps already laid out.

What is "formulaic" funding? As laid out in the NPRM, it is a system of determining the level of funding using some formula based on size. Size is the only variable mentioned. No mention was made of income levels, rural vs. urban, cost of telecommunications, or any other factor. Perhaps other factors would be allowed to creep in to the formula. But basically, each applicant would get an amount of funding determined by the formula to spend any way it wants.

Is that better? I'm still on the fence about it.

Pros:

• Simple application: just send in your enrollment (for schools)
• Less opportunity for fraud
• Funding will go to the biggest applicants, not the applicants with the biggest appetite
• Applicants would know the level of funding before the start of the program year
• Applicants would have to live within a budget
• Less incentive for unscrupulous service providers
• Less need for paid E-Rate consultants
• If size is the only factor, each student gets the same level of funding

Cons:

• You won't know 'til audit time if the services you're purchasing are really eligible.
• Waste would be much harder to find.
• How can we make a fair formula?
• Some applicants will have to reduce their spending on telecom/Internet infrastructure. Isn't the goal of the program is to increase that infrastructure?
• Applicants who had been very frugal will have an incentive to increase their spending to use up the entire lump sum they receive.
• Hey, I'm an E-Rate consultant; less need for E-Rate consultants is bad.
• Once the funding is more of a block, it would be easier to make a case for folding E-Rate funding into general education funding.
• If size is the only factor, rich communities would get the same funding as needy ones.

Anyone else care to add pros or cons?

Formulaic approach likely

Well, my perusal of the FCC's NPRM (Notice of Proposed Rulemaking) finally reached the comments by the commissioners. The comments are always full of fluff like "I fully support this important program," but sometimes they also give you a peek behind the curtain.

What peek do we get this time? The only thing Chairman Martin said (besides "blah blah blah fully support blah blah blah operational efficiency blah blah blah") was: "This type of formulaic approach may hold promise for improving the administration of the E-Rate." So the new idea of giving applicants a lump sum based on size seems to have come from the new Chairman.

Commissioner Copps' statement has two paragraphs, and zeroes in on the E-Rate, saying nothing about the other Universal Service programs. The first paragraph lists the proposals that he supports: simplifying applications, multi-year applications, more debarments. The second paragraph lays out his opposition to the formulaic funding approach, and pleads with those who would be negatively affected by formulaic funding to send in comments.

Comissioner Adelstein takes a bit longer to get around to it, but eventually lays out his position: support for strengthening debarment and streamlining applications, and his opposition to formulaic funding.

So the Republican Chairman supports formulaic funding, the two Democratic commissioners oppose it, and the other Republican commissioner is silent. Which says to me, if you don't want formulaic funding, you'd better answer Commissioner Copps' appeal and make your voice heard.

Still no FCDLs

With less than 10 days left until the start of the funding year, we still have zero funding commitments. Rumor has it that the delay was caused by a lack of FCC approval for some of the secret rules that the SLD uses to process applications.

You've got to figure that there will be at least one wave of funding before June 30th, so that the FCC and SLD can avoid the embarrassment of starting the program year with no funding approvals.

But I'm not expecting a huge wave. My sense is that the PIA review process is way behind. For the 2003-2004 program year, PIA almost met its target of 80% of FRNs processed by June 30th. Since then, their record has gotten worse. And no wonder: the rules for the Item 21 Attachments have gotten more complex, there's the whole NCES code mess (the code is required, but not requested on the form), and PIA staff were pulled earlier in the year to help clear the backlog of invoices.

FCC considers major changes

If you haven't read the latest Notice of Proposed Rulemaking (NPRM) from the FCC, you really ought to check it out. What is an NPRM? Whenever the FCC is considering a rule change, they post the ideas they are considering, and anyone can comment. Anyone. So if you have a stake in the program, you should consider submitting your comments. You don't have to comment on everything; just zero in on the ideas you think are the best (or worst) and describe how they would impact you.

This NPRM is very broad, so whatever you'd like to see changed, you probably have an opportunity to tell the FCC what you think.

Some highlights:
Funding by Formula: Paragraph 33 describes a possible new funding mechanism where each school and library would receive a set amount of funding to spend as they see fit. The funding would be determined according to the applicant's size.

Streamlining the application process: Paragraph 37 asks for suggestions for reducing the burden of the application process.

Certification of service providers and consultants: Paragraph 43 asks if the FCC should set standards for service providers and consultants.