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Thursday, April 24, 2008

Cost-effectiveness can't Win

I've been griping about Cost-Effectiveness Reviews (CERs) for some time now. I just saw an E-Rate Central submisssion supporting the appeal of a CER that nicely lays out the problems with CERs.
The FCC has created the mess by requiring cost-effectiveness, but refusing to define what that means. Now there are three possibilities:
  1. The cost-effectiveness "bright-line" standards are part of the secret tome of PIA procedures approved by the FCC,
  2. USAC has developed standards, but the FCC has never seen them, or
  3. USAC has no standards.
If the first is true, then the FCC is developing rules in secret. Well, actually, the rules would have been developed by USAC in secret and approved by the FCC in secret.

If the second is true, then USAC is exceeding its authority by creating program rules.

The third option would be the worst. It would mean that there is a person (or group of people) sitting in a room somewhere, reviewing applications, and sometimes deciding, "That's out of hand!" And in order to pass a CER, the applicant has to convince him/her/them that the request is not out of hand. With no objective criteria, the process is arbitrary in addition to being secret. It becomes a matter of giving the reviewer(s) a warm fuzzy. After the applicant has sent info off to USAC, hoping to hit on something that will sway the reviewer, the applicant and USAC just end up going back and forth with "Is too cost-effective!" "Is not!" "Is too!" until USAC issues a final "Is not!" in the FCDL and takes its ball home.

There are certainly criteria for triggering a CER; these reviews are not assigned randomly. It is clear to me that USAC takes the amount of the request, divides it by the number of students, and if the result is over a certain number, the applicant gets a CER. So there is a "bright line." The only question is whether this is part of the FCC-approved secret tome of PIA rules, or a rule that USAC just came up with on its own.

As ESPA pointed out in their recent filing, the result is that CERs disproportionately hammer small applicants, whose cost per student is higher than average.
The E-Rate Central filing supports an appeal from a small school serving disabled students. I have two clients like that, and I expect a CER every year. When you have 40 students and 200 staff members, the cost per student for everything from phones to network drops is unusually high.

As I've said before, the CER is the worst of all the program's audits/reviews, because the process is completely secret. No one even knows how many CERs are conducted, and how many applicants pass a CER.

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