It's about time

Remember back in June 2005, the FCC released a broad Notice of Proposed Rulemaking (NPRM), requesting general comment on the way the Universal Service program was run? Well, a short two years later, we have a Report and Order covering administrative matters, with the promise of a policy order to come.

First beef: Why didn't they call it the Sixth Report and Order? Now we're going to have to call it the "August 2007 Report and Order" or something. OK, the other 3 programs haven't had a Fifth Report and Order, but at least it would have a name.

Much of the document seems to be concerned with bringing the other 3 USF programs in line with regulations already applied to the E-Rate program. But on my first read, I see a few changes for applicants:

1. Expect some changes in the forms, as USAC will be collecting some new performance measures of the program's success. One interesting measure is that USAC will have to collect information on what technology applicants are using to connect to the Internet.
2. The FCC declined to adopt processing standards for USAC, but will be measuring processing times. So maybe we'll see standards in a couple of years.
3. The FCC has mandated that USAC reach out to "a sample of the economically disadvantaged schools and libraries that choose not to participate in the E-rate program. The Administrator should determine why these schools and libraries choose not to participate and assist them, if necessary, in the beginning of theapplication process." HATS on steroids.

The big question is, when will we see the promised policy order? I'm hoping before the end of the federal fiscal year on Sept. 30. On the other hand, if it took them over 2 years to come up with this order, which says almost nothing new, we may be waiting decades for substantive change.

What's your favorite flavor?

A star-crossed Tech Director from CA went to an ice cream store (for fear of lawyers, I'll just say it's probably the largest chain in the U.S.), looked down at his napkin and saw this.


First the E-Rate invades my dreams, and now I'm afraid to go out for ice cream.


But it's got me thinking: what kind of ice cream flavors might be inspired by the E-Rate? I mean, Rocky Road would be appropriate, but I'm thinking of custom flavors like:
Filing Window Crunch
Service Substitution Fudge
Eligible-Services-List-Late-Again Ripple
Applying-for-E-Rate-is-Not-a Sherbet
Nutty Rules
Raisin' Requirements
Internal Controls Cone (of Silence)
FRN Split
These-Rules-Are-Making-My-Head Swirl
You-Get-an-Extra-Day-Because-the-Window-Ends-on-a Sundae


I was trying to work out a name taking advantage of "caramel" ending in "Mel," but I just couldn't come up with anything.

Time for a new job

Here's a sign that I spend too much of my time on this program: last night I dreamed that I was on the phone with a PIA reviewer. The good news is that while 4 years ago, all calls with PIA were nightmares, this dream was not scary (though I wouldn't call it pleasant).

Site visits creepier

The audit creep continues in the Extended Outreach Site Visit (EOSV) program. Originally billed as a way to collect feedback and success stories, with a little regulatory compliance tacked on, now they are becoming just on-site audits (focusing on Priority 2), with a little feedback tacked on.

The paperwork requirements for these visits just keeps growing and now they're adding document requirements that shouldn't be requirements.

The latest follow-up letter I got demands a "maintenance log." The only mention of such logs that I could find on either the USAC or FCC site is on the EOSV page of the USAC Web site, where it says they want logs "if available." USAC's Document Retention Checklist doesn't mention anything about logs. But the follow-up letter I received implies that the logs are required. How intimidating for an applicant who is not familiar with the rules. On the plus side, the letter does have a reference to the Fifth Report and Order, where the FCC's rules on document retention can be found.

Apparently USAC is scaling back on EOSVs (from 1,000/year to 350, and maybe to 100 soon). It can't come soon enough.

No comment

Since I have only opinions, not facts, I won't be submitting a comment for the about the latest Request for Comment from the FCC, about the request by Louisiana and Mississippi to extend the special Katrina relief rules. The states have asked that all affected schools be kept at 90% for 2007 for Priority 2, and that the funding be expanded to cover all Prio 2 purchases, not just those necessary to return schools to pre-Katrina levels.

OK, I can definitely see how schools would still be rebuilding, so it does make sense to extend the rules. But I'm opposed and here's why:

1. Expanding the "relief" to include any equipment a school cares to purchase because the school was damaged is going beyond even the original scope.
2. The E-Rate is not the right vehicle for relief. I just don't see the connection between interstate telecommunications and hurricanes.
3. Giving anyone a 90% discount is a bad idea: it causes waste, fraud and abuse. Giving a 90% discount to a broken school, a school scrambling to get back on its feet, a school where administrators are strained to the limit, is just asking for it.
4. For 2007? Now's the time to grant relief for 2008-2009. That way there will be some predictability for applicants.
5. If the FCC really wants to do this, they should take some of the rollover funds (the original estimate was $132 million) and set it aside for Katrina relief, and let damaged schools apply for 70% funding of internal connections until 2009-2010, or until the money runs out, whichever comes first.

But I find it hard to tell the FCC that I think the people affected by Katrina don't deserve special consideration, so I'm keeping my comments here.

Secrecy rules

Another appeal caught my eye today. Basically, an applicant is appealing the retroactive denial of almost a million dollars of funding that was approved and disbursed in 1999.

The appeal leads off with a reasonable request for the records that led to the denial of funding. Since lawyers wrote it, they call it "discovery." And the poor lawyer who wrote the appeal seems to really believe that it is a reasonable request that will be granted once a reasonable person reads it.

Not in the E-Rate program. As the FCC made clear in the Inter-Tel and Harrington-Lueker decisions, PIA review records are secret. That's right, if an applicant is denied for funding, and requests the records used to make that determination, USAC and the FCC will stonewall.

So not only is the 700-page rule book for PIA reviewers secret, but so is the material they collect during their review.

It's an astonishing level of secrecy for a program that involves transfer of funding from one government entity to (almost entirely) other government entities.

I don't buy the arguments that investigatory techniques, like the exact benchmarks that trigger a Selective Review, should be kept secret. Publicize them. Tell applicants: "If you do the following, you will get a Selective Review." "If you spend more than $X.XX per student on a data network, you will get a Cost Effectiveness Review." And so on. Applicants will stop doing those things.

Because by keeping them secret, USAC and the FCC are denying many more funding requests from honest applicants who made an error than from dishonest actors.

What really gets me is that the FCC keeps the information secret by hiding behind regulations created to keep "law enforcement" practices secret, so that criminals wouldn't be able to stay a step ahead of law enforcement. I'll bet you didn't know that when Solix, a for-profit private company sub-contracted by USAC (a non-profit private company), reviews your application, you are actually involved in a law enforcement proceeding. First of all, how can the government outsource law enforcement? And second, why is a routine application for funding considered a law enforcement action?

Danger, Will Robinson!

I've been perusing all the comments that people have posted about the Eligible Services List, and I agree with most of what I've seen so far, but I saw one that made me think: "Be careful what you ask for."

The State E-Rate Coordinators' Association (SECA) started with a good premise: applicants should not be punished for accidentally putting the T-1 to their ISP under Internet Access on the 470, or listing the Internet access on their phone bill under Telecommunications Services. And then what do applicants do about Blackberry service? It's a problem.

But I think the solution that SECA suggested opens a large can of worms. Vicious, man-eating worms.

They proposed that PIA shouldn't just look at whether the 470 had the right Category of Service, but should instead look to see if the actual service is listed on the 470, regardless of what Category of Service it was listed in. No, no, no.

I do not want PIA reviewers trying to match up individual items on the 470 with my Item 21 Attachments for 3 reasons.

First, it would take a lot of time. Since there is no standardization of terminology on either the 470 or the Item 21, PIA reviewers would have to waste a lot of time trying to figure out what goes with what. More PIA time on each app means longer waits for FCDLs, and more money for admin overhead.

Second, PIA reviewers would make mistakes. Who could blame a reviewer if s/he sees "trunk line" on the 470, but "ISDN PRI" on the Item 21, and doesn't realize they're the same thing.

Third, PIA would be forced to do make some ad hoc rules about what is allowed on the 470. If I put "data connections for 4 buildings" on the 470, and on the 471 I put "4 T-1 lines" or "leased fiber WAN" or even "purchase of fiber optic cable for 4 buildings on one campus," that's OK, as long as the Categories of Service match up. Would it be OK under the SECA proposal? I don't know. And I don't like going into the application process with even more unknown rules.

I agree that PIA's use of Category of Service to match 470s to 471s is far from perfect, but it beats SECA's suggestion by a mile.

Good news and more good news

Any of you who've been reading right along now that I love to ponder the E-Rate program and imagine how it should be. But man, after a day of meetings with a bunch of E-Rate wonks and some USAC staff, I'm ready for a day of filing 486es (the most mindless, most pointless, and easiest part of the E-Rate process).

Many points of E-Rate arcana were discussed, and I thought the meeting was useful and interesting, but there were two things that really jumped out at me.

First, Mel Blackwell (for those who don't know, the Big Enchilada at SLD and the man responsible for some positive changes there) said that from now on, applicants can include new information in appeals. That's great news. I can't find where the FCC changed this rule, but I don't spend as much time looking at FCC rulings as the folks at USAC do.

Catriona Ayers (the head of PIA) said that from now on, if applicants are going to be denied, PIA will send a letter listing the reasons for denial, and applicants will have 15 days to fix it. It's a dream come true, and the only way that USAC and the FCC could hope to staunch the growing flood of appeals. I don't see where the FCC requires this exact practice in all cases, but it's certainly clear from the series of orders that came out on May 8 (see the list here) that the FCC wanted applications handled this way.

I actually got one of these letters, but I thought it was just an isolated procedure. In the case of the letter I got, though, I found a lack in "specificity," which is mentioned in the May 8th orders.

The net effect? USAC's hands are untied, and they'll be able to give applicants a second and third chance to get it right, which should mean fewer appeals. Eventually.

In the meantime, the application process just gets friendlier and friendlier.

CER secret police

Be warned, this is going to be a rant.

I've decided the Cost Effectiveness Review (CER) is the most heinous of all the audit/review/investigation procedures in the E-Rate program. Even worse than the "let's-use-the-invoice-approval-process-to-take-another-look-at-the-funding-commitment-decision-we-made-a-year-ago" review.

Why the worst? Well, let's see: 1) you're guilty until proven innocent, 2) you don't know the charges against you, and 3) in the end you won't know why you were denied. It's like something out of Kafka.

The first problem is one that is common to the entire E-Rate program, but is exacerbated by the complete secrecy of the CER. The burden of proof is always on the applicant. USAC doesn't have to prove that a request is ineligible, the applicant has to prove it is eligible. That's OK when the applicant knows the rules (or at least most of the rules).

But in this case, no one outside USAC/Solix knows any of the rules. We don't know whether reviewers are looking at the total cost, unit cost, cost/student, cost/classroom, ports/student, phones/student, phones/classroom or some combination of factors. How can I prove a request is "cost effective" if the definition of "cost effective" is completely secret?

If there are standards, no one in the applicant/service provider community knows what they are. Since the FCC has declined to set public standards, my guess is that there are no standards. Instead, I'll bet a little group (or one person?) in Solix (the subcontractor that USAC pays to process applications) looks at some requests and says, "No way! That's out of hand!" and starts a CER. So the only chance of beating a CER is to convince that secret little group of subcontractors that they were wrong, and it's not out of hand. Without speaking to that group, or getting more than oblique hints as to what they thought was out of hand.

Or, you can appeal to the FCC, which is what CER victims are doing.

I'm hoping that there are enough CER appeals in the hopper to make it worth the FCC's while to issue one of their blanket orders on CERs before September. My hope is that the FCC will continue their "second chance" philosophy and force USAC to tell applicants exactly what they have to do to make their request "cost effective" (cut the number of ports, buy a smaller phone system, bring the cost down to $110/student, whatever).

Because this CER nonsense has to stop.

Glass half full

This could be the start of something big. For years now, I've been telling everyone who would listen, up to and including Mel Blackwell, that the best way to cut down on appeals is to send applicants a letter saying in plain language: "We've decided to deny your funding. Here's why, and here's what you can do to prevent denial." And I've insisted that the first sentence should say, "you're going to be denied."

Yesterday, I got a letter that almost does it. I have a client that just failed a Cost Effectiveness Review (I would be interested to see the stats on how many applicants get a CER, and what percentage of them are denied, because I think it's really high). And I got an email that starts: "Based on the documentation that you have provided, the entire FRN ???????? and, the entire FRN ????????? will be denied." Excellent!

But then it falls apart. The second and third parts of the letter "Here's why" and "here's what you can do" are so vague as to be useless. I don't know why the contract was deemed cost-ineffective, or what information might change the reviewers' minds.

The problem, of course, is that the Cost Effectiveness Review process is completely secret. To actually tell us the reasoning behind the denial would be to lift the veil of secrecy. So instead of telling us, "the ports/classroom ratio is too high," or "the dollars/student ratio is too high," or whatever, the letter just refers us to the eligible services page on the USAC Web site. Puh-lease. I've read that page many times, and I think everything that was requested is eligible.

But still, merely getting the letter is a positive development.

Glass half empty

I've been very happy with the way that the approval process has been going: the PIA reviews got going early, and have kept moving at a good pace, the vast majority of my clients have made it through the process, and even some Priority 2 applications have been approved.

Then a number jumped out at me from today's SLD News Brief: $926 million in funding approved. With the extra cash which the FCC unfairly rolled over into this year, that's less than one third of the fund.

I remember going to a USAC board meeting where they almost hit a target of 80% of all apps processed by June 30. At the time, I remember thinking that the target should be 100%, but now 80% seems to good to be true. I thought this year was going well, but I can see that the glass was half empty. Well, actually, five-sixths empty, since only $458 million (less than one sixth of the fund) had been approved by the start of the funding year.

Mel Blackwell needs to stand up and say that all Telecom Services, Internet Access or Basic Maintenance FRNs should be funded by June 30. Ideally, they should be funded by May 31, so the service providers have time to set up their accounting systems to discount. As an interim goal, 70% of apps should be processed by May 31, 90% by June 30.

Basic maintenance is a problem since it's Priority 2, but if they sent out FCDLs that say something like "Will be funded if funds are available" (instead of "As yet unfunded"), I think we could count that as an application processed. Even better, move Basic Maintenance to Priority 1, or pre-fund Priority 2.