Another $600 million misspent

I shouldn't have used such a pessimistic title, because I think this is good news, mostly: today the FCC rolled over $600 million in unspent funds from the 2002, 2003 and 2004 funding years, into funding year 2008. (Here's the announcement.)

First, my complaint: the FCC should stop changing the size of the fund after the application window has closed. It's unfair. As I've said before, the FCC should take this rollover money and use it to set the Priority 2 denial threshold before the application window.

For the short term, though, this rollover is wonderful news. As I posted earlier, it is likely that USAC will need more than $2.25 billion just to cover Priority Two for the 90% applicants (after paying for Priority One).

The bad news is, this rollover probably isn't enough for USAC to start funding Priority 2. About $1.95 billion was requested for Priority One, and Priority Two requests from 90% applicants totalled about $1.07 billion. That's $3.02 billion. With this rollover, the fund has $2.85 billion. Now some of the funding requests will be denied, so eventually maybe the $3.02 billion will be reduced to $2.85 billion; they'd only have to deny 6% of requests to do that. It seems likely that eventually, 6% will be denied. E-Rate Central did some calculating on this, and 14% of applications were denied in 2007.

But it will take time for USAC to deny $170 million. I'm betting no Priority Two until maybe September.

On the other hand, I would have expected the FCC to do whatever was necessary to find enough funding to allow USAC to start funding Priority Two, so maybe I'm wrong.