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Monday, June 18, 2007

$650 million unfairly distributed

I saw an interesting speculation from E-Rate Central this weekend: it is possible that there will be enough money to fund all Priority Two requests. Now, E-Rate Central is clearly not making an actual prediction, just musing about a possibility, but just the possibility that it might be true is appalling.

Appalling because increasing the funding cap by 29% after the application window has closed (by rolling over $650 million in unused funds) just blindsides applicants.

A Priority Two application is not something applicants can do lightly. In general, internal connections projects which go through the E-Rate process are less cost-effective than projects which do not go through the E-Rate process. Having to select a vendor and a solution 18 months before the start of a project does not get you the best solution or the best price. And with the 2-in-5 rule, applicants are forced to enlarge the project to include everything that might be required for the next 3 years, which is not cost-effective nor good program management.

So it is a bad idea to put your project through the E-Rate process unless you have a good chance of getting funding. But applicants will not be able to guess what their chances of getting funding are if the size of the fund can vary by 30% after the application deadline.

As I've said before, rollovers should take place before the opening of the filing window. Even better, use a large surplus to pre-fund Priority Two.

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