2-in-5 working?

The SLD has come out with their funding Demand Estimate for 2007-2008, and I'm trying to come to some conclusions, but not really succeeding.

I was really looking to see if I could detect the effect of the 2-in-5 rule on demand, but I couldn't really do it. Since the 2-in-5 rule took effect for Funding Year 2005, Priority 2 demand has been dropping slowly. There was a precipitous drop between FY 2004 (pre-2in5) and FY 2005, which could indicate that the 2-in-5 worked. But there was an almost equally precipitous drop between FY 2003 and FY 2004, when 2-in-5 was just a twinkle in the FCC's eye. I think the drop was caused by all the news stories about abuse, and people realizing that the E-Rate was not just a blank check. (In fact, the 2-in-5 rule came out late in the FY2004 application window, and some of my clients jacked their Priority Two requests because they saw 2-in-5 coming.)

But in the end, I think 2-in-5 has been a failure. The idea was to push Priority Two funding to a wider range of applicants. Unless I'm mistaken, in FY 2004, applicants down to 80% were funded for Priority Two. The Priority Two threshold hasn't gotten below that since, and I'm predicting it won't for FY 2007, either.

Meanwhile, the 2-in-5 rule increases the complexity of the program.

I'd rather see the FCC adopt the recommendation of the Taskforce on Waste, Fraud and Abuse: Cut the top discount rate for Priority Two funding to 80%. I noticed that the discount cap was not in the FCC's big NPRM (Notice of Proposed RuleMaking, a request for public comment on ideas for new rules) 18 months ago. Apparently the large 90% districts have killed it.

Rant time: 90% is too much. I used to work as a tech director in a 90% district. If I went to the Supt. and asked for $1,000 to replace a dying server, I had to show an urgent educational need. But if I went in and said I could $9,000 in funding if the district ponied up $1,000, I got the green light with no questions about urgent need.

As a consultant, when I talk to tech directors about their plans for internal connections, they talk about a switch here, a server there, replacing a broken component on the PBX. When I tell them they can get a 90% discount, their eyes widen and they start talking about replacing their entire voice and data infrastructure and going wireless to boot. (By the way, I don't see the same behavior with telecommunications: no one adds more phone lines just because they're cheap.)

In general, that's what the E-Rate is supposed to do: tilt the decision-making balance away from crushing budget realities and toward the technological needs of the districts. But 90% is too close to free.

In my opinion, 80% would be a big improvement, but is still a little too close to free. I'd like to see equipment discounts capped at 70%.