Brief hopes dashed

I got my hopes up when I saw that the FCC had published an addendum to the Eligible Services Order released a couple of weeks back.

Maybe they heard the collective "HUH?!" issued when we all read the "unbundled warranty" rules in paragraph 28, and revised the guidance?

Nope, they're just renumbering some misnumbered paragraphs.

So we're almost a quarter of the way into the filing window, and I have yet to hear of anyone who understands what the rules are on hardware maintenance.

E-rate by any other name

I just can't give up on capitalizing the "R" in "E-Rate." As faithful readers know, after chastizing others for their spelling of our beloved program, I recently noticed that my spelling is not the same as the FCC's.

So of course I'm thinking that the FCC is wrong, and I set out to prove it. So I thought I'd start with the Telecommunications Act, which created the E-Rate (OK, E-rate, whatever). Alas, "E-rate" does not appear in the law. So I went to the regs: again, bupkus.

Well, what about the founders of the E-Rate? Well, it was called the "Gore Tax," so I thought I'd see how the inventor of the Internet spelled it. Alas, I could not find any writings from Gore using the term "E-Rate."

The E-Rate was the result of the Rockefeller-Snowe-Exon-Kerrey Amendment, so let's see how those senators spell it. The first 10 documents that Google listed from Rockefeller's Web site with "E-Rate" in them included 7 using "E-Rate" and 3 using "E-rate." Damn, Senator, make up your mind. The "E-rate" documents were all 2001 or earlier, but there were some early "E-Rate" spellings, too.

On to Senator Snowe. Google found only 3 documents on her Web site (understandable that a Republican does not want to trumpet her involvement with this program). All "E-Rate." Way to go, Sen. Snowe!

Senator Exon? Never heard of him. (How much did the Exxon lobbyists have to pay him to change his last name? And why didn't they pay him a little more to add the second x?) I can't find anything written by him with "E-Rate" in it.

Senator Kerrey. I only found two documents. One used "E-rate," the other "e-rate." Booooo!

Well, at least I'm not the only one who's been spelling it "E-Rate," but I can't say that the will of Congress was to have that "R" capitalized.

Maybe if I file an appeal with the FCC, asking them to capitalize the R? They seem willing to grant just about any appeal these days. Nah, they'd probably just grant me a waiver with that "narrow focus" paragraph at the end, and USAC would interpret it to mean that any documents that capitalize the R should be denied.

Did I say that out loud?

Most wonderful time of the year

It's official: I have gone over the edge in E-Rate dark side. Once again, USAC has put a countdown to the close of the window on their main site. For a normal person in my position, that clock would be like the timer on the bomb in so many movies: a constant reminder of impending doom. When I look at it, I should be hearing tense violin music.

Me, though, I like it. When it first appeared, I found the inclusion of the seconds counting down to be very amusing. Kind of like a bomb in a Naked Gun movie, with over-the-top violins.

But this year, my reaction is even more troubling. I'm so used to seeing that clock appear in December that seeing it just now actually put me in a holiday mood. Instead of hearing ominous violins, I'm hearing Burl Ives.

I have definitely gone through the looking glass.

Window timeframes through history

Just out of curiosity, I updated a table that I had posted before, and thought I'd share it:

FY	ESL release	Window open	60 days?	Window close	Window days
2005	10/14/2004	12/14/2004	61	2/17/2005	65
2006	11/22/2005	12/6/2005	14	2/16/2006	72
2007	10/19/2006	11/14/2006	26	2/7/2007	85
2008	10/19/2007	11/7/2007	19	2/7/2008	92
2009	11/21/2008	12/2/2008	11	2/12/2009	73
2010	12/2/2009	12/3/2009	<1	2/11/2010	71

And they're off!

Probably anyone who reads this blog has enough E-Rate Geek Factor that this is old news, but the application filing window for 2010-2011 opened today at noon EST. Here's the official announcement.

The window closes February 11. USAC says that's 71 days, I say 70.5, but in any case, it's enough.

What is scandalous is this:
In the Third Report and Order, the FCC created a laudable rule of allowing at least 60 days between the release of the Eligible Services List (ESL) and the opening of the window. That makes a lot of sense: how can districts adjust their tech plans and craft a Form 470 without knowing what is eligible. Ever since then, the FCC has waived the rule, and given us less (much less) time.

But this year takes the cake. The FCC released the ESL last night, and the window opened today at noon. Instead of 60 days, we got about 18 hours.
Maybe this is the last year we'll be faced with this problem. Along with the ESL, the FCC released a Notice of Proposed Rulemaking, which would require USAC to submit the proposed ESL to the FCC three months earlier each year, with the goal of moving the release of the ESL back to September, where it's supposed to be. I'm all for that.

Small blessing

Check it out: I was using the Billed Entity Number Search Tool today, and forgot to put the % wildcard at the end, and discovered that the % is no longer necessary!

Today's ray of sunshine for the usac.org-addicted.

Don't Doubt Mel

Back in September, when Mel Blackwell predicted that the Priority Two denial threshold would get down to 70%, I doubted him. Now that USAC has announced they'll be funding down to 80%, my doubt is gone.

How was I so wrong? Something is making the FCC and USAC confident that the percentage of FRNs approved will be lower than in the recent past. Could it be there were a huge number of requests from 2008-2009 at 87%, and applicants filed contingent FRNs for 2009-2010, and now that 08-09 is approved at 87%, all those contingent requests go away?

Whatever the reason, now that the funding is over the 80% hump, we could see funding run the table, since there is only about $100 million in requests below 80%. Applicants below 80% gave up on applying for Priority Two funding years ago. Or in some cases, districts dropped some schools from their request in order to get the discount above 80%.

Why did I ever doubt Mel?

CIPA update coming, but when?

eSchoolNews has an article about the new CIPA requirements. For those who don't know already, Congress passed a law a ways back requiring student Internet safety training. (How could you not know about it? For months, some companies selling such training have been implying that districts which aren't doing such training now are going to lose funding.)

Well, the FCC finally released an NPRM about it. The NPRM says that the new certification will be on the Form 486 for 2010. I don't think the FCC is being realistic about the timing of this.

First of all, the NPRM says, "the next opportunity for applicants to certify CIPA requirements, including this certification, would be on the FCC Form 486 for funding year 2009." Huh? That deadline was a couple of weeks ago.

Next, let's take a look at the timeline. OK, the NPRM has been released, but I did a quick search of the Federal Register, and couldn't find it published there. So let's say it's published today. The FCC has to wait 45 days for comments. That's January 1, 2010. Now the FCC has to review all the comments, finalize the rules, and approve them. I don't think that's going to happen in a month, but let's be optimistic and say it's released in February. Now the Form 486 has to be amended. Let's be optimistic and say that USAC has already made the changes, and has the form ready in February. Doesn't a change in a federal form have to be approved by the OMB? I know the last change to the 486 was, and I know it took several months. Let's be optimistic and say it only takes 3 months. That's June.

So with my wildly optimistic timeline, the FCC manages to slide the form in by July. Now they're going to have to give districts some time to implement this change, so we'll get another weird multiple choice thing like the current CIPA certification where you can just intend to comply for a couple of years before you comply.

Why not just have the new certification start July 2011?

My Comeuppance

I have in the past complained about the use "eRate" instead of "E-Rate." But today it was pointed out to me by some E-mpa® colleagues the the FCC uses "E-rate."

My first reaction: that's just wrong. It's a proper name and should be capitalized. We don't say "Universal service fund Schools & libraries program."

Second reaction: surely it hasn't always been this way. Well, I've looked back, and it seems it always was this way. (Actually, I found a 1999 announcement from Chairman Kennard that uses "e-rate," which is just aberrant.)

How unpleasant to be be corrected after my self-righteous correction of others.

I'm still not sure I can bring myself to write "E-rate." It may be time for me to consider moving to a new profession. Or maybe I can start using the catchy USFS&LP.

Bloody Wednesday

Well, for a while there I thought it was going to be nothing but denials. The FCC released 9 appeals decisions today, and I read 5 denials before I came to an appeal granted. Final score: 6 denied (covering 15 applicants), 3 granted (covering 3 applicants).

Most of it was fairly run of the mill: don't post a Form 470, you're denied; when the Eligible Services list says dark fiber is ineligible, it means dark fiber is ineligible.

Some decisions that at least clarified things:

1. Eagle Hill: Dormitories are not eligible locations, even if some instruction takes place there.
2. Eagle Hill: Head Start is not eligible unless state law says it's elementary education.
3. Keyport: Prior to 2005, the FCC didn't have document retention requirements, so applicants "had no obligation to produce documentation that it would not normally maintain for other purchases, particularly where the state law did not require Keyport to seek competitive bids."

No time for a detailed reading: it's BEAR season.

Mel’s palantir

OK, so I’m done with a full day of USAC training, and I’m ashamed to admit it was kind of fun. Kind of.

SPOILER ALERT: If you’re going to attend one of the trainings, there will be fewer surprises if you read further. And without surprises, it is harder to remain conscious through some of the sessions.

I found the nuts & bolts sessions somewhat informative, though I heard “case by case” too often. For a long time, I bought the argument that USAC can approve more funding if they have more wiggle room by not locking down the rules. But now I’d rather have more specific rules. Because it’s a drag for applicants when they can’t get funding because of some rule that they can see, but the bigger bummer is having funding denied because of some unknown rule or procedure. Even worse is having funding granted, then taken back, and that almost always happens because the rules are unclear. (Oh, wait, no, the rules are clear, but applicants disregard them.)

The most interesting session, as usual, was Mel Blackwell’s, mostly because he gets to make predictions.

The only prediction that had a guaranteed timeline was that the Round 4 audits will not until the filing window is closed. I asked in a different session if the Announcement Letters (which start the clock for supplying documents) will come out before the end of the window, and the answer was “no comment.” So I guess we can assume that Round 4 will start right after the window, with some Announcement Letters coming out before the end of the window.

Perhaps even better news (which came from Mel, but during the “Audit Response” session) is that the Round 4 audits will not be attestation audits. Mel promised that the audits will be less painful, and more proportional to the amount of funding involved.

Mel also talked about shortening the window. He had a great graph showing that almost all 471s are filed in the last 7 days. So why keep a 50-day window? I’m OK with that if they want to start the window in mid-March and end it in May. But if we’re talking moving the end of the window earlier, I’m against that.

Mel also talked about the upgrade in USAC’s computer systems. He promised several improvements, but said we’ll see “a few for 2010, more for 2011.” Among the improvements he said he expected:

1. Online Item 21 Attachments will be available to service providers.
2. Applicants will have a “copy my app” tool, allowing us to copy and revise previous year’s 471, instead of having to start from scratch.
3. Online applications will do more data validation, making it harder for us to make mistakes.
4. USAC will set up a data portal to improve our access to USAC data.

Mel’s last big prediction: The denial threshold for 2009 will be below 80%, “in the 70% area.” I think he’s wrong, but I think just having him say it creates downward pressure on the denial threshold. Yesterday I heard another E-Rate veteran predict that we’ll never see 80% again, and I’d have to say that I think that’s more likely. (For the jargon-impaired, the “denial threshold” is the discount level below which Priority 2 funding will not be available.)

The fog of eligibility

Here's the ugly side of eligible services. For the first time I can remember, the FCC has denied an appeal where the applicant thought that a piece of software was eligible, honestly told PIA exactly what they were requesting, got approved, then were denied after invoicing USAC. As the appeal asks, "How can it be deemed ineligible...1 year after it was initially funded?"

This is a great example of a problem that needs to be fixed. The applicant believed that a software product qualified as a multi-point conferencing unit (MCU) for videoconferencing, which was eligible. The service provider also believed it was eligible. So did the PIA reviewer, so the application was approved. So the software was installed, and the service provider billed USAC. But lately, USAC has been using the invoicing process as another opportunity to assess eligibility, and USAC decided that the software was ineligible, reduced the funding commitment, and refused to pay the invoice.

I'm not saying the software in question is eligible, because I don't have all the info. It may be a "software MCU" with a few extra features (which might be considered "ancillary use"), or it might be management software that expands the capability of an MCU, but isn't an MCU itself.

Eligible or ineligible isn't the point. The point is that the applicant and service provider apparently thought the product was eligible, and the PIA reviewer agreed. It just seems unfair that USAC can come back after the project is done and change their decision on eligibility.

"Approval" should mean something. PIA is scary enough for applicants, but if the result of PIA is only a conditional approval contingent on later approval by other reviewers, applicants can never rest easy.

I have heard the advice, "don't push the envelope on eligibility and you won't run into trouble." OK, but I have to say that even for me (and I consider myself an eligibility expert), there is no envelope, only a dark plain with swirling patches of fog. You can tell when you're deep in the fog, but you can't tell where the edge of the fog is. Even if you pick a clear spot and stand there, the fog may swirl over you.

Webex palantir?

The FCC is doing a workshop on the National Broadband Plan, and the future of the E-Rate is on the agenda. So I know where I'll be this Thursday (August 20th) at 1:00 p.m. (Eastern time).

Here's part of the info I got from NCTET:
The event will be broadcast live via WebEx, Second Life, and web-based video feed, and interested participants will be able to submit questions to the panelists via WebEx, Second Life, and Twitter. The Education team is also soliciting ideas for the Plan via Ideascale at http://usbroadband4ed.ideascale.com/. Information about the Workshop (including video and Twitter feed info) can be found at http://broadband.gov/ws_education.html (WebEx video feed is confirmed, FCC is working on a Quicktime feed as well, which will be posted closer to the event date).

Participants interested in attending in person can register online at http://broadband.gov/workshops/registration.htm?wsid=13, and participants interested in attending via WebEx can register online at https://fccevents.webex.com/fccevents/onstage/g.php?p=0&t=m

Here's the agenda:

1. Broadband and educational outcomes
2. Opportunities and benefits of broadband in education
3. Future use of broadband in education
4. The future of the e-rate
5. Most promising broadband related applications and devices for education
6. Digital literacy

The waive stops here

Ever since the Bishop Perry Order, it sometimes feels like "what will it take for the FCC to actually deny an appeal?" The answer from yesterday's appeal decision: be involved in fraud and your appeal will be denied.

Actually, the FCC has denied other appeals, where it could be demonstrated that the competitive bidding process was not open and fair. That seems to be where they draw the line on granting mulligans on honest mistakes. So it's no surprise that they denied this appeal, where people have been convicted for their behavior in this competitive bidding process.

I just hope the FCC doesn't see such cases as evidence that the Form 470 process is effective. The people involved in this case didn't get caught because of the Form 470 process. The Form 470 does not inhibit the dishonest, it only complicates purchasing for the honest, driving up prices and adding complexity to the process.

My staycation

USAC just announced (on the Service Provider Conference Call) that the big data system switchover that's been in the wind for years is actually going to happen at the end of August. The plan is that some time in late August, all the systems will shut down for 2.5 weeks. The static pages will be available, but not any of the search tools, application tools, Submit a Question, etc.

So my kids will be seeing more of me in late August.

Pretty good timing. Application review and 486es are mostly done, the application window won't open for several weeks, the BEAR deadline is much later.

And Mel Blackwell mentioned that one of the upgrades planned is a new application process where you can take last year's application, edit it and submit it. That was on my 2006 Christmas wish list, so if I were better at PhotoShop, I think I'd have a picture of Mel in a Santa hat here.

Cash rolling in

Well, it's official: the FCC is rolling over $1 billion in unused funds. Interestingly, they're rolling $900 million into the current (2009-2010) funding year, and saving $100 million for the 2010-2011 funding year. I've speculated in the past that the unusually large rollover this year is a one-time bump caused by some accounting changes at USAC, and next year we'lll be back to the more typical level ($600 billion or so). Apparently, the FCC wants to spread the wealth a little bit.

So what will be the denial threshold for 2009-2010? I'm too swamped to really do any real analysis, but let's take a quick look:
With a $900 million carryover, the total funding available is $3.15 billion.
Priority One requests are about $2 billion.
Priority Two requests from 90% applicants are $800 million.
Priority Two requests from 80-89% applicants are $1 billion.
Let's assume USAC denies 15% of the funding requests received. (I think I read that E-Rate Central had figured out that the post-Bishop Perry rate was around there).

In that case, we'd need $2.4 billion to cover P1 and the 90-percenters. We'd need $3.2 billion to have an 80% denial threshold. If we assume that funding requests in the 80%-90% band are evenly distributed, the denial threshold will be 82%. Me, I think USAC is serious about helping more people get approved, so the actual denial threshold will be 84%. We'll know in a year or so.

Anyone care to start a pool?

Notice how my analysis doesn't mention the 2-in-5 rule? That's because the 2-in-5 rule doesn't work. (What, you thought I would mention the denial threshold without beating my favorite dead horse? How long have you been reading this blog?)

Nice debut

Julius Genachowski gave his first speech as FCC chairman yesterday, and I'm happy with it. He said:
blah blah blah the U.S. is doing better in one important category: broadband connections in schools – schools like this one.

Why are we lagging in many broadband categories but comparably better in linking classrooms?

Because we had a plan.

In the Telecommunications Act of 1996, Congress enacted a program called the 'E-Rate' to provide discounted Internet access in schools and libraries. The FCC implemented the plan and our country has made real progress – though there’s much more to do in this area. blah blah blah

Two things I like:
1) He's holding up the E-Rate as a model of success.
2) Since there's "much more to do," it doesn't sound like he's planning to cut the E-Rate program.

So far, so good.

Another year, another survey

Funds for Learning has published the results of their Second Annual National E-Rate Survey. It's not as interesting as last year's, because the results are basically the same.

One change is that fewer respondents are using a consultant (18% last year, 16% this year). I'm sure it's not a real change, but it feels good to see the market expanding. Or should I be worried that more applicants are deciding to go it alone?

The biggest nettle for me is that 26% of respondents still believe that the 2-in-5 rule has had a positive effect. What can I do to convince them that it's a failure? Maybe I'll rent one of those billboard trucks and park it outside the hotels where USAC is doing training. Or call a flash mob into the training to chant:
"2-in-5 is 0-for-5!"
or maybe
"What do we want?" "Internal Connections funding!" "When do we want it?" "In whichever year makes sense from a technology management perspective, rather than being limited to twice every five years for each location!"

So good, I registered twice

I'm feeling the good vibe from the first day of summer vacation for my kids, so I won't even get snarky about this, but check out the USAC home page. It seems that all the registrations for the training sessions in most cities were wiped out some time yesterday (June 19th). So if you were good and registered early, you must register again. I'm sure someone's face is as red as the text on the home page. And here's an idea for whoever handles tech support for USAC: with a little pressure from a screwdriver, you can pop the Delete key right off that person's keyboard. (Oops, and I said I wasn't going to get snarky.)

Fortunately, the registration process is pretty painless, so I didn't mind doing it again.

The hotel registration was a little more trying. If you try to register online for your hotel room, you may find that the discounted rate is only available for the night before training. At least that's the case in DC. So you have to make separate registrations for other nights. It was easier to call.

I think I'll slide a litte rant in: Bethesda?! Is the hotel close to Mel's house, or are they trying to keep us far from the USAC mothership? I don't know any good restaurants out in Bethesda.

Forgotten GAO report

I managed to finish the recent GAO Report on the E-Rate while my umbilical cord to the Internet was cut off during airplane flights some weeks back, but never got around to posting.

I posted my thoughts on the first twenty pages, so I'll be looking at the rest of the report. (I can't really call it an "analysis" since it's off-the-cuff).

The GAO is all worked up about the amount of undisbursed funding. The opening salvo is that one quarter of the funding committed in funding years 1998 to 2006 was not disbursed. A more correct statement would be that one quarter of the funding committed has not yet been disbursed in the funding year in which is was committed. The differences are:

1. Much of the $5 billion not disbursed has been rolled into future funding years.
2. Disbursements are not yet complete for any funding year (I'm sure there are still some appeals from 1998 languishing at the FCC), and nowhere near complete for 2006.

A few pages later, the GAO says that carryover funding will only increase Priority 2 funding if Priority 1 requests don't increase, and "some applicants for Priority 2 services, who would receive funding if aggregate requests and commitments were more consistent with actual disbursements, do not receive funding in the current environment."

Nope, that's just a shell game. If funding remains capped, and Priority 1 requests continue to increase, there will be less funding for Priority 2, period.

It is true that if USAC and the FCC take steps to decrease undisbursed funds (like increasing commitments once they're free of ADA), and continue to carryover undisbursed funds from previous years, it will create a bump in funding, but only temporarily. Eventually, the decrease in undisbursed funds will result in less carryover, and we’ll be back in a situation similar to today.

Next, the GAO looks at participation. I’ve already stated my opinion of their estimates of percentage of participation. They also listed some reasons for the low participation by private schools and libraries, but they missed a reason that I often see: the technology plan. The tech plan requirement is a major disincentive for private schools and libraries.

For most private schools and libraries, E-Rate is the only reason to have a tech plan. Generally, public schools are required to have a tech plan, so for them it’s not an issue. In my experience, libraries don’t have to have a tech plan, though I think this may vary from state to state. And for a small school or library, with a simple voice and data infrastructure, a tech plan is not necessary from a management perspective.

And the tech plan is the most onerous of the E-Rate forms. I know it’s not technically an E-Rate form, but whenever I give a presentation on the application process, I always list it as the first form, because it’s the first piece of paperwork you have to have. It would be better if it were a form, so that it would be more obvious when an applicant had missed a required element. In any case, it is by far longer and more difficult to complete than any of the forms.

I have spoken, for example, with the director of a library with a 90% discount who said that she only made up tech plans when she was planning to install internal connections equipment. It just wasn’t worth the work to cover their phones (like most small organizations, they use Centrex phone lines, so they needed a tech plan until recently) and connection to the state library’s Internet. So they just didn't apply for E-Rate. With a 90% discount.

And I know private schools that only apply for phone service so they don’t have to do a tech plan. Those schools count as “participating,” but they are not fully utilizing the program.

My favorite part of the report: 79% of applicants surveyed said that paid consultants were very or extremely useful. We consultants outscored every other resource. The same survey indicated that only about 25% of applicants use a consultant. That means that about 54% of applicants found consultants very useful even though they weren’t using one. That surprised me, but then I thought about it.

Most consultants I know got into the business because they wanted applicants to get funded. A lot of us provide free training and free advice. I don’t keep track of how many people come to my presentations or Webinars or call me with a simple question, but it's in the hundreds.

Another pair of numbers jumped out at me: 67% of applicants said state E-Rate coordinators were very or extremely helpful, but 31% said “do not know/do not use.” That only leaves 2% of people who used a state E-Rate coordinator and found her or him less than very helpful. That tells me that if we could put active coordinators in every state, it would help those 31% who don’t know their state E-Rate coordinators. What if USAC hired a state E-Rate coordinator for each state? Let’s say it would cost $100,000 per state. I’d say it’s $5 million well spent. If states want to continue to fund someone, great; a second coordinator wouldn’t hurt.

The report lists 7 changes to the E-Rate program that were favored by most applicants surveyed. Here’s what I think of the changes:

1. Put Form 500, service substitutions, SPIN changes online: Yes, yes and yes. I know you can do service subs and SPIN changes through the “Submit a Question” system on USAC’s Web site, but that system is so lame I avoid it whenever possible.
2. Streamline Priority 1 application: Yes. Here’s what the Priority 1 application process should be: send us your service providers and account numbers. Done. Rely on state laws to ensure competition. Get Block 4 info from the USDA. If applicants want to upgrade service or start a new service, then they can file Block 5.
3. Multi-year Priority 1 applications: Yup. If you’re not changing service in any way, you shouldn’t have to file anything.
4. Set dates for application: Yeah, let’s make it May 1 every year. Then we’d see a streamlined application review process.
5. Reimburse applicants directly: Who doesn’t want this? Well, besides USAC, which would have to send out checks to thousands of applicants instead of hundreds of service providers.
6. Advisory panel of practitioners: Yes, and the panel is ready: E-mpa®, the association of E-Rate consultants. No one does as many applications as we do. And we’re really nice to boot.
7. Increase PIA training: I don’t know how much training they get over at PIA, and I don’t often feel that they can’t do their job. My frustration with PIA is with the process, not the people.

I laughed when I read the statement that “agencies that are successful in measuring performance strive to establish measures that demonstrate results, address important aspects of program performance, and provide useful information for decision making.” What are the criteria for success in measuring performance? I’m betting the GAO defined success using the three objectives above, so they’re saying that saying in essence that successful agencies are those that strive for success. Those agencies which strive for other objectives do not meet the GAO's objectives as often.
The GAO also mentioned that “performance measures should cover key governmentwide priorities—such as quality, timeliness and satisfaction.” OK, here are some:

Quality

1. Increase the approval rate. The approval rate has been climbing steadily. Let’s keep it going.
2. Decrease waste, fraud and abuse (WFA). It just seems like this has to be a goal. And making this a goal would provide incentive for the FCC to make clear that most improper payments are the result of applicants misunderstanding E-Rate arcana, not WFA.
3. Decrease audit findings. This objective would create an incentive for the FCC to develop an audit process that did not create findings for inconsequential problems, or for problems that do not impact the E-Rate.
4. Increase the number of classrooms/public areas connected to the Internet. We’ve already got most buildings connected to the Internet; now let’s make sure it’s available in every room in those buildings.
5. Increase the bandwidth of connections. Applicants are generally increasing the need for bandwidth, and innovative technologies will continue to demand more bandwidth.
6. Decrease maxed-out BEARs and SPIs. It often happens that an applicant’s actual expenditures exceed the pre-discount amount on the Form 471, which limits the amount of funding that applicant will receive. The GAO is putting great emphasis on undisbursed funds, which pressures USAC to decrease commitments; this measure would provide counterpressure to increase commitments.

Timeliness

1. Decrease time between Form 471 and start of funding year. It would create more flexibility for applicants, put pressure on PIA to streamline application review, and end the requirement that applicants illegally sign contracts before budgets are approved.
2. Require that all Priority 1 applications be approved within 90 days of submittal. Increase the time frame to 180 days for all applications filed in the last two weeks of the window. It would be a real incentive for applicants to apply early, and another incentive for PIA to streamline the application process.

Customer satisfaction

1. Simplify the application process. Reduce the paperwork, create forms that collect all the information needed. And if you can’t collect all the information needed on a simple form, then simplify the rules to reduce the information needed.
2. Increase applicant satisfaction. Every time an applicant hits “Submit” on one of the online forms, they get one of those annoying popups that offer a $25 discount on a magazine subscription if they’ll fill out a customer satisfaction survey.
3. Increase public satisfaction. Every year, survey the public to see what they think of the program. The public is, after all, paying the piper. USAC’s outreach now mostly preaches to the choir; they should expand to include the public at large. Get positive news stories out there. I want to see E-Rate billboards on the NJ Turnpike. Provide incentive for applicants to publicize the amount of E-Rate funding they get.

FCC takes a bite out of crime

Kim Friends over at CSMG recently pointed out to me that that Judy Green (convicted of fraud in connection with the E-Rate) got a 10-year debarment, plus 3 years of probation, during which "USAC shall review with heightened scrutiny any applications in which Ms. Green is involved during her probation period, and shall conduct automatic annual audits on Ms. Green’s E-Rate activities during each of the first three funding years, upon her re-entry into the E-Rate program." Now that's a real debarment. Of course, Ms. Green will be in jail for 7.5 of those 10 years, but at least the debarment is longer than the sentence, and there is a 3-year probation, too. (In another recent case, the prison sentence was 5 years (plus 3 years of probation), but the debarment is only 3 years.) I'm glad to see stiffer debarments.

ESL PDQ

Check it out! The proposed ESL for 2010-2011 has been posted. And we have 3 whole weeks to comment (plus another week for reply comments). This is great news! Could it mean an final ESL in the summer? Will we actually get 60 days between the release of the ESL and the opening of the filing window, as required by regulation?

I'll be filing fullsome comments later, but here's my shoot-from-the-hip reaction to the proposed changes, based on the Public Notice:

1. List Ethernet under digital transmission: Yup, not a rule change, just improved clarity on the list
2. Text messaging eligible: Good. How would we pull those charges out of cell phone bills?
3. Interconnected VoIP elegible under Telecom Services and Internet Access: Another fine clarification. Now let's get VoIP designated as "Basic Telecommunications" in order to be technology-neutral.
4. Password-protected Web pages eligible: I'll have to read the list to find out exactly what it says, but this whole Web hosting thing gives me a headache.
5. WLAN controllers eligible: These were eligible, so it's good to see them on the list.
6. Interconnected VoIP user licenses eligible under internal connections: Oy. I hope that this is just an error in the Public Notice. How are licenses to use interconnected VoIP, which is a Priority 1 service, an internal connections item? I'm hoping they mean licenses for applicant-owned VoIP phone systems, not interconnected VoIP service.
7. Unbundled warranties eligible: Again, putting something already eligible on the list is always good.
8. Virtualization software eligible: Virtualization is going to be a major headache, because the purpose is to allow several different servers to sit on the same hardware, and to allow servers to be moved between hardware platforms more easily. Server eligibility is already more complex and limiting than most clients want to deal with, and virtualization makes it much worse. Good thing I still remember how to multiply fractions.
9. Broadcast messaging ineligible: I'm OK with that, and happy to see the ineligibility of emergency notification system clearly delineated.
10. Power distribution units ineligible: I don't even know what they mean by this.
11. Video-on-demand (VoD) servers ineligible: Oh, this will be a firestorm. There are some VoD salespeople whose business plan is E-Rate-dependent. This would be a major change, and an unjust one.
12. Softphones ineligible: Not a rule change, just a clarification of a good rule.
13. Interactive white boards ineligible: Did people really need this spelled out? Those white boards are so end-user.
14. E-mail archiving: This is good, because there are some really expensive email solutions that schools would buy if they could get 90% off.

All in all, lots of clarification, not much change. Which I think is just fine.

Finally commissioning new commissioners?

The Wall Street Journal is reporting that the Republicans have finally decided on their nominees for the FCC, which should clear the logjam in nominees. We could be looking at a full FCC this summer.

I don't think the E-Rate has much of a transition-related logjam but maybe we'll finally get some decisions on the program changes that the FCC sought comment on in 2005. However, since those changes were clogged up long before this transition, I'm not hopeful.

The new Republican nominee, Meredith Attwell Baker, seems OK: she has solid experience in government and telecom, her father-in-law is James Baker, and at least one trade journal called her "collegial and genial." Experienced, connected and nice; what more could we want?

eSN goes WWN

It looks like eSchoolNews is taking a page out the tabloid playbook with the headline "Unused eRate funding totals billions."

OK, first off, it's "E-Rate," not "eRate." I don't care much for the hypen, either, but we don't get to change the name the program because we don't like it. It would be like using "E-SchoolNews," just because I liked the hyphen.

But the real issue is that I find the headline (and the rest of the article) misleading and harmful to the program. It makes it seem as if there are billions of dollars being wasted, which is wrong.

The first paragraph of the story is even worse: "About $5 billion of the estimated $19.5 billion in eRate [sic] funds committed to schools and libraries from 1998 to 2006 were never used, according to a recent report from the Government Accountability Office (GAO)."

Incorrect. It is probably true that schools and libraries spent about $5 billion less than was committed to them (though I have my doubts about the GAO's numbers), but it is not true that the funds "were never used." Some of that funding is being held in reserve, because the arduous application process means that there may still be some expenditures from those funding years. The rest of the money has been carried over into other funding years. Every last penny of that funding has been or will be used.

My paranoid mind already sees the GAO trying to take away our carryover funds, so I hate to see an inaccurate slam coming from what I would expect to be a sympathetic periodical.

Secret announcement

Here's this week's smile. I was looking through the FCC's list of E-Rate Orders, and noticed this letter from the FCC to USAC, approving the PIA procedures for 2009-2010. The procedures are hundreds of pages of secret rules. I just find it humorous that the approval is public, but the procedures are secret. And when I say "humourous," I mean "enfuriating."

But I've already ranted about this, so this evening, it's just a wry smile.

Funding fiber

Warning: This post contains no useful information, only snarkiness and brief potty humor. So maybe you should skip it.

Last week's News Brief reports, apparently without any sense of irony, that the final regular wave for 2007 will be issued this week. It took me a second before I snorted. A "regular" wave of funding is being issued over 10 months after the end of the funding year?! That doesn't meet my definition for regularity.

Maybe USAC should pay more attention to the amount of fiber in their commitments; perhaps the rules on fiber WANs need to be more lax.

These delayed commitments are a serious matter. For recurring services, districts have to forego service or pay full price and get reimbursed a year after the end of the funding year. It would be interesting to see what percentage of the undisbursed funding (bemoaned in the recent GAO report) are the result of committals rendered useless because the applicant had to forego the service. And it's an accounting nettle to receive reimbursement for costs incurred two fiscal years ago.

Some suggestions for fiscal regularity:

1. Simplify the rules
2. Simplify the rules some more
3. Set the denial threshold before the start of the funding year
4. Streamline PIA process for Priority 1 funding requests
5. Don't make rule changes midstream (look at all the time Solix is wasting on Web hosting requests this year)
6. Penalize PIA for Basic Maintenance FRNs left undecided after the start of the funding year.
7. Use "As Yet Unfunded" more liberally (only call it something like "Funded Pending Funds Availability"); knowing that an FRN will be funded unless it falls below the denial threshold can be very helpful in deciding whether to forego service or pay the full cost.

Imagining early denials

It’s been an exciting week in Washington for the E-Rate, and Funds for Learning released a nice summary. Aside from the GAO report and the USAC board meeting, which I’ve already blogged about, a new FCC Commissioner was nominated, and Congressional action on the E-Rate.

I really don’t know anything about the new nominee, except that she’s got telecommunications chops and a father in Congress. Sounds good to me.

The Congressional action is a mixed bag. On the plus side, a bill has been put forth to exempt the E-Rate from the Anti-Deficiency Act (ADA). That’s good news on two fronts. First, we won’t ever again have to worry about a repeat of 2004, when the ADA shut down new funding commitments for several months.

Second, USAC will be able to return to the practice of committing funds above the cap, knowing that not all commitments become disbursements. This will cut down on undisbursed commitments, which will make the GAO happy, but it will also make possible much quicker determination of the Priority Two denial threshold.

Currently, USAC is committing only what they can fund. For Priority Two, that means that the denial threshold can only be set after essentially all commitments have been made. And so every year we end up in a situation where funding requests which are close to the denial threshold (this year, applicants at 86% and 87%) are not approved until the funding year is more than half over (this year, 87% applicants are still waiting).

Without ADA, USAC will be able to estimate disbursements in March, and set a denial threshold at that point (which will be lower than with ADA, because it will be based on estimated disbursements, not commitments). I don't really expect the denial threshold to be set in March, but maybe it can be set before the start of the funding year.

Imagine a world where USAC announces the denial threshold in June, and it's below 80%. The permanent end of ADA makes that a possibility.

Get me on that bandwagon

We're finally starting to see some pushback on audits. First, based on information from George McDonald over at E-Rate Central, who had attended the quarterly USAC Schools & Libraries Committee meeting, board members are seeing complaints from Congress and the public, and seeing bad press. If only USAC could cut the number of audits, but they're just coordinating audits set up by the FCC.

After reading the rules about how large a sample must be taken, it looks to me like the only way to decrease the sample size is to decrease the percentage of improper payments found. And the way to do that is to simplify the rules and make them all public. USAC could help with that.

And then I see that United States Telecom Association and CTIA – The Wireless Association sent a letter to the FCC complaining that the audits are not required by IPIA and are not being conducted correctly. The letter is focused on the High Cost program, but the complaints all apply to the E-Rate audits, too.

With Congressmen and telco lawyers on our side, there is hope for fewer audits next year.

The GAO doth count too much, methinks

I still haven't found a real use for it yet, but it's cool that the GAO published some of the data used to create their report. The information is in rather tedious formats (sorry, no spreadsheets or delimited text files), and you won't find the survey results at all unless you read the "Instructions for Viewing the E-Supplement" section. (I felt like I was in the DaVinci Code, unveiling hidden information.)

As I glance through it, I'm getting the same feeling that I've gotten from the report so far: the numbers don't seem right to me. I was looking at the entities participating in the E-Rate, and it seems high. They have 2,117 entities participating in NJ, but if I look at every entity that has ever applied in NJ, I come up with only 1,790. One possibility is double-counting because some entities apply as a school one year, then as a district the next. But even double-counting those entities, I still only come up with only 1,978 applicants.

What's not so easy for me to count is when a district uses an individual school as the Billed Entity on a 471. My 1,790 number counts such cases as two separate entities, but I would think they should only be counted once. My quick count found about 200 cases like that, so I'm down to around 1,600 participating entities.

Also, I think they are counting any entity that ever applied as a participating entity, instead of just looking at a single funding year. Of the 1,790 entities I counted earlier, only 136 (less than 8%) applied in all 12 years of the program. Meanwhile, 382 (21%) of the 1,790 applicants applied in only one year of the program. There is no funding year where the total number of participating entities in NJ is over 1,000.

Oh, and about 30 consortia in NJ have participated, and their members often also apply separately, leading to another double-count, but that's small potatoes.

So GAO says the participation rate for NJ is 82%. My look at the data says that in any given year, the participation rate is less than 40%.

Maybe I'm just missing something, but I think the GAO is seriously overcounting participation.

ETEWS report on the GAO, part 1

I just spent my lunch hour reading the GAO (Governement Accounting Office) report on the E-Rate, which got me to page 20 or so. My E-Rate Threat Early Warning System spotted some more Good Intentions Paving Stones.

First, the report was apparently requested by Joe "Bleed the E-Rate Dry" Barton, so there is no question that the report was not intended to help the E-Rate. Just seeing his name on the report gave me the chills.

Check out one of the two recommendations the GAO made: "report annually in its performance plan on undisbursed funding." Remember when I first laid out my concerns, when I said they would take the carryover funding and move it to another USF program? Step one is complete.

And how would one justify taking money from the E-Rate to fund broadband for homes? Well, the GAO recycles the idea floated in a 2005 Office of Management and Budget (OMB) report that given the increase in schools' and libraries' level of Internet connectivity, "it is no longer clear that the program currently serves an existing need." Step Two complete.

(Rant within a rant: So the OMB and the GAO are saying that since so many schools and libraries are using the E-Rate to stay connected, we no longer need the E-Rate?! That's like saying that since so many Americans graduate high school, we don't need publicly funded education any more. Poppycock.)

I'm only a third of the way into the report, and already the GAO is saying that it wants to look at undisbursed funds, and that they don't have evidence that the E-Rate is necessary.

Now we just need to push the contribution percentage to a eye-popping level by, say, making cell-phone Web access part of the Low Income Program, and suddenly the E-Rate's carryover funds are gone.

ETEWS report, part 1

Just something to think about from the E-Rate Threat Early Warning System:

A group of telcos met with the FCC to push for adding broadband to the Lifeline and Link Up programs (aka the Low Income Program of the Universal Service Fund (USF)).

It sounds nice, but as I've been saying, the road leading to the death of the E-Rate is paved with good intentions. Adding this program to the USF means that the USF will grow, which means that the contribution will grow, which means we'll all see an increase in our phone bills, which will create pressure to cut USF costs elsewhere.

Of particular concern is the list of companies that visited the FCC: it's mostly cell phone companies. Do they envision the USF subsidizing Web-enabled cell phones for low-income people?

The first paving stone has been laid.

Flies and Spiders

I thought I was done with my Web hosting rant, but after looking at the April 24 News Brief, I find my bile renewed.

In that news brief, a new concept is introduced: "control" of the Web site. In order to be eligible, the Web site must be "in control." I'm not sure what that means.

And it doesn't really work. No Web host will actually give a client complete control of a server. For one thing, there are probably other clients' sites on that server. Clients have very limited control over the server, unless they lease a dedicated server, which may be ineligible as Off-Premise Priority Two equipment, depending on the terms of the contract.

I think what USAC is getting at with this "control" concept is that they don't want to fund Web hosting which includes Web pages that the applicant cannot edit. That almost works. If you say that only Web pages created by the applicant are eligible, you do make lots of undesirable hosting features ineligible. Online applications like student information systems generally provide Web pages created by the service provider which allow access to client data. Since the applicant cannot edit (does not "control") the Web pages, they are ineligible.

In the case of a value-added Web host, the online editing forms and templates and blog forms, etc., cannot be edited by the applicant, so they are ineligible.

But it won't hold up. Web hosts can give applicants the ability to "control" (edit) those pages. And USAC is going to have to get into the mirky area of where the Web server software (IIS or Apache) ends and the Web hosting begins.

It's as if Web hosting were a dark forest, and every now and then USAC sees a bright spot of rule clarity, but as soon as USAC enters the clearing, it turns dark. But another bright clearing appears in the distance. After years of pursuing those lights, we've lost the trail.

The only trail out I see is to set a price limit on Web hosting.

Oh, what a tangled Web

First, let me say that the new Web hosting rules, listed in the April 10 News Brief are better than the old rules. And USAC is being more open about what's eligible and what's not, with a narrative and examples in the April 24 News Brief.

But the rules are still weak. Let's go rule by rule:

Eligible features and services include:
Provision of website traffic (bandwidth)
OK, this is pretty clear.

Provision of disk space for storing applicant-provided content
So if the applicant provides content to be stored in a database, is that eligible? I don't see how you write this rule to be specific enough, yet flexible enough.

Provision of FTP transfer capacity so that files can be maintained
So applicants can't use WebDAV or FrontPage Server Extensions? I think what this rule is trying to say is that Web hosting cannot include interactive page editing, only the upload of content. Why? And where can you find that? Even a $24/year Web hosting account has some kind of online page editing feature. If a service is ancillary on all commercially available products, why make us prove ancillary over and over?


Ineligible features and services include:
Webpage design/creation
This rule is reasonable clear, and is paying someone to create Web pages should be ineligible.

Access to software applications (e.g., blogs, homework, chat, student information systems, content management systems)
This is the rule that kills me. First of all, it renders all Web hosting ineligible. The Web hosting world breaks down into two camps: Microsoft IIS and Apache (sorry Mac people, but I have never seen a commercial Web host offer OS X hosting). All IIS Web sites are "applications." And while it is technically possible to build an Apache Web server that only hosts static Web pages, no one builds a server that way. This rule is made for the Web 1.0 world, and we live in a Web 2.0 world.

And some of the the e's that are g'n don't make sense to me. Why are blogs ineligible? Does that mean that if a teacher wants to write a paragraph a day about happenings in the classroom, that's ineligible? And why is "homework" ineligible? If a teacher maintains a page that shows the homework assignments for the week, that's ineligible? Making chat ineligible makes a little more sense to me, but when you get right down to it, if a district decides that chat is the most effective way to provide information to parents, why make it ineligible? "Student information systems" come up over and over; OK, we got it, they're ineligible. And "content management systems" (CMS) should be ineligible, but when the rest of the world says CMS, they are talking about software to sift through existing documents and getting the information in them up on the Web, not systems that assist people in writing Web pages.

My local library offers me access to periodical databases, etc. Does that make the whole site ineligible? Not that it matters: the E-Rate process is too onerous for the vast majority of libraries.

Access to storage features such as "virtual hard drives"
Why does this rule start with "Access to"? What should be ineligible is the storage, not the links to the storage. Otherwise, this rule's OK.

Access to content creation/editing features including templates
Again, delete the "Access to." And again, this makes every Web host ineligible; you can't find a Web host that doesn't offer templates and online page editing. Even worse, this rule hamstrings Web sites: we should encourage schools and libraries to have Web sites where staff can easily post information.


This web is still too tangled. It's clear that trying to pin down which Web hosting services are eligible is not working satisfactorily. I'm not sure it could ever work satisfactorily, even if they put me in charge.

Don't worry, I have a solution:
Give schools an annual Web hosting budget of $2,000 plus $0.50 per student (pre-discount). Give libraries $2,000 plus $0.03 per person in the town they serve. And make clear that the purpose of the Web site has to be to provide information to the public.

Here come the funds

And we're off! USAC has announced that they will send out the first wave of 2009 Funding Commitment Decision Letters on April 28. Excellent! It's not a huge wave, but a respectable 6,931 letters approving $134 million. USAC is very proud of how early the wave is out, and it is great, but for me the key is how many applicants can be approved by early June. Those applicants will be able to get their 486 approved before the start of the funding year, so they can get discounts right away. This is especially true for Basic Maintenance (BMIC) FRNs, as applicants often have to make a decision on service agreements by July 1.

Alas, BMIC FRNs are Priority Two, and those FRNs won't be funded until the FCC does its annual rollover of unused funds. This year's demand for Priority One is just over $2 billion. The Priority Two demand from 90% applicants is just over $800 million. That's $2.8 billion and the fund is only $2.25 billion without carryovers.

The carryover is generally approved in the last half of June. The rule is that the carryover is to take place in the second quarter, and the FCC chooses to wait for the end of the quarter. Too bad they don't choose to do the carryover in April. Even better, the FCC should set the Priority Two denial threshold before the filing window opens.

But it's good to have at least some FRNs come out in April. So thanks, USAC!

National broadband? NIMBY!

Back in January, I voiced my fears that the Obama administration’s goal of increasing broadband access might threaten E-Rate funding. Now the FCC has released a Notice of Inquiry (NOI) about the national broadband plan, and a couple of paragraphs seemed to me to be like the creepy music that plays in the movie to foreshadow doom. Or is that one of my kids in the next room playing on the keyboard?

The NOI has no hint of any plan to take funding from the E-Rate, but that was the point of my earlier post: harming the E-Rate might be an unintended consequence of the expansion of Universal Service.

But first, an aside: in paragraph 33, the FCC asks whether it should "collect additional data from broadband providers, consumers, health care providers, schools, libraries or other governmental organizations." You know that annoying Block 2 on the 471? Look for that to grow. Not a threat to the program, but a bother for applicants.

In paragraph 39, the FCC asks how the Universal Service programs "might be better targeted to address broadband deployment." Paragraph 40 makes it clear that they're really talking about the High Cost and Low Income programs, which seem better suited to providing broadband to consumers, but I see two potential problems for E-Rate.

First, someone might propose that the Alaska Order be expanded to all areas without broadband access to the Internet. Schools rural communities would be allowed to provide high-speed wireless access to residents after school. It seems like a good idea, except that it's bound to increase the amounts charged to the E-Rate, putting the program under further strain.

The second potential problem is much more serious. The FCC buries the lead question for the E-Rate in the last sentence of the Universal Service section of the NOI: "What effect would including broadband as a supported service have on the size of the universal service fund, and on contribution requirements?"

Here is the threat that I talked about back in January. Right now, the USF contribution factor is over 11% and growing, thanks mainly to the High Cost program. But Universal Service program as a whole gets negative press as a result. If the USF has to pay for broadband access to every home, and the contribution factor climbs to 30%, what will happen? Will the E-Rate be cut? Will the carryover from previous years be carried over to another part of the USF?

I guess I'm a funding NIMBY: I'm all for nationwide broadband, but don't put the funding source anywhere near my program.

Are the waives receding?

Could it be that the tide is turning, and we won't see such big waives coming from the FCC?

The FCC's latest appeal decision actually denies 31 appeals. I did a quick count, and I found a total of 3 other denials of applicant appeals in the (almost) 2 years since Bishop Perry. According to Spint, the Sprint decision a year ago affected "scores" of applicants, but it was only one appeal. Meanwhile, I think I counted over 1,000 appeals granted. Wow.

Here's my Chicken Little imitation:
This is the first appeal decision of the new administration, so it is a harbinger of things to come. It was Chairman Martin who declared "surf's up" and caused the FCC to waive, waive, waive.

But I'm not really that negative. I think the FCC has waived everything they could, and now they're finally scraping the bottom of the barrel, dealing with the appeals that they just can't find a way to grant.

Also, these appeals were about problems with the 470 and the bidding period, and the FCC can't bend those rules as much. If you make a mistake on any of the other forms, it really doesn't harm the program to let you have a mulligan. With the Form 470, however, it is very easy to make a mistake that will result in restricting competition. (Or that would be true if the Form 470 were actually effective in promoting competition, but don't get me started on that.)

At least some of the denied appeals in this case were things like forgetting to check the box on the 470 that says you want Telecommunications Services. A small oversight, but if you don't check it, no one has an opportunity to bid on your services. The FCC can't give you a do-over because these appeals are years old, so they have to deny those applications.

Really, the FCC was as lenient as it could be on all these appeals. (Well, it could have admitted the truth, that existing state purchasing laws are much more effective at promoting competition than the Form 470, but that would be too much to ask.)

So maybe in two years we'll see this as the decision that turned the tide on the Bishop Perry decision, but I'm betting that it will be the first in a series of decisions where the FCC continues to waive rules wherever it can, and denies appeals when it must.

Get RIDF this one

Check out this appeal.

Back in 2002, a district (which shall remain nameless) Director of Technology (who shall also remain nameless) took part in a kickback scheme with a service provider (you guessed it, nameless) where the service provider took $5 million from the E-Rate for doing nothing, and paid the tech director $2 million to falsely certify that some services had been received.

Eventually, the school district figured it out, ratted out the tech director, and the schemers got some prison time. And, of course, they were debarred from the E-Rate program.

Now USAC is coming after the district for $3 million.

I guess the funding was improperly disbursed and all, but it seems a bit harsh to ask the district to pay it back when the district never got any of the money or the equipment.

I'm here to help

So check this out: USAC is asking the FCC for an extension to get their annual audit done. Seems the FCC was slow in approving this year's audit, and now they really can't get it done by April.

My first thought: now you know how we feel when Basic Maintenance contracts get approved in March. But that's petty, and it's not really USAC's fault.

So instead of criticizing, I'd like to offer to help.

Two of my clients will be getting visits from teams of auditors this month, and we would be willing to redirect those auditors to DC to assist USAC in getting their audit done on time.

We're always happy to help our friends at USAC.

My own petard

I've been complaining along with the rest of the E-Rate community about the timing of audits. Why did they have to come right at the busiest time of the year? Why not have them start in March or April?

Now I'm getting my "be careful what you wish for" comeuppance: two notifications in the last week or so of upcoming audits. Actually, it is much better than getting all the requests at once, but I'm still trying to close up one of the earlier audits, so it feels like piling on.

I did a quick check, and looks like 100% of my clients with disbursements of over $500,000 in 2007-2008 got audited. It's not a big group, so maybe I'm just unlucky.

2-in-5 is 0-5

I'm a little late in commenting on this, since I'm facing a flurry of audits.

USAC released its demand estimate for 2009-2010, and once again, the "2-in-5 Rule" (which says that applicants can only purchase Internal Connections twice in a 5-year period) has failed. The stated purpose of the rule was to decrease demand, but it just doesn't work.

This year the Internal Connections demand among 90% schools is down significantly from last year, but still above 2007 levels. There was a big bump in demand in 2008, and now we have returned to the steady increase in demand which we've seen since the 2-in-5 Rule took effect.

I'm thinking that this year's denial threshold will be low (60%?) because USAC has a big pile of money sitting around ready to be rolled over, but I give the 2-in-5 Rule no credit for that.

I've said it before and I'll say it again (and again and again): the 2-in-5 Rule must go.

What's the protocol?

We've noticed one small change to the online Item 21 Attachment application, and I don't like it.

For FRNs in the Internet Access category, the drop-down menu of services used to have one choice for "Broadband Internet access." Now there are several items like "DSL" and "Frame relay" and "T-1."

I understand why the change was made. In order to approve an FRN for Internet access, PIA always wants:

1. Number of connections
2. Bandwidth (speed) of connection(s)
3. Type(s) of connection(s) (cable, T-1, etc.)

So it makes sense to have the Item 21 Attachment ask for all those things. Up until this year the form did not actually ask for any of that info. You were just supposed to put it in the "description" box.

I agree that the current method of collecting data makes it useless for any kind of analysis, so I suppose it's good that the form now asks for type of connection. Except it's not quite right. Here are the problems I have with it.

First, the items say "DSL" and "Frame relay" not "DSL Internet access." OK, anyone techie will figure out what's meant, but I guarantee at least one applicant is going to see "Frame relay" there and think that the frame relay circuits connecting their buildings should be in Internet Access, which is wrong. Even worse, this is going to feed the misunderstanding about the allowability of WANs under Internet Access, which is muddied enough already. The items should be "Internet access: DSL" and "Internet access: T-1" and so on. That way, the list would sort nicely, with all the Internet access items together.

Next problem: not all the possible technologies are there. Here in NJ, many districts are still using ATM, but that is not one of the options. The new trend is to have an Ethernet interface, though I believe the carrier is actually using MPLS to transport those packets. And the cable companies only use cable modems up to a certain point, then they are offering an Ethernet handoff, and I don't know what protocol they run behind it. In more rural areas, satellite Internet access is common, but it's not listed either. The form can't list all the possible transport protocols, but they seem to have missed some biggies. There will always be a need for an "Internet access: Other" item.

Third problem: not all applicants buy the local loop circuit with their Internet access. At that point, it doesn't really matter what technology is being used for the circuit (which is a Telecommunications Service).

Why does PIA want to know what the transport technology is, anyway? It's not like the information is reliable. Most of my clients who have a a 1.5 Mbps ATM or frame relay circuit think it's a T-1 (and the telecom salespeople often call it that), and I wouldn't know what to call an MPLS circuit with an Ethernet handoff, even if MPLS or Ethernet were an option. And few of the PIA people I've talked to have a good grip on this. Who would want the information if it were reliable? Does the FCC want to know how many applicants are using which protocols?

Finally, one of the options on the dropdown is "T-2," which is a 6 Mbps circuit that I've never heard of anyone using (apparently it died in the 1970s with the picturephone it supported). Typically, telcos will sell "bonded T-1s" until you get to 9 Mbps, at which point they switch to a "fractional T-3" (although they're just as likely to call it a "DS-3", which I think is more correct (which makes me wonder why you almost never hear anyone use "DS-1," which would be a more correct description of these circuits than "T-1," I think)).

And why not have boxes for "Bandwidth" and "Number of connections"? If PIA wants that info, the form should ask for it.

This week's horror

So last week I'm in the midst of gathering contracts for my clients so I can file their 471s, and I'm rejoicing over the final demise of the Two-Signature/Two-Date Rule (2s/2d), which I dubbed the Jason Rule because it just kept coming back after the FCC had apparently killed it, and what do I see a trailer for? Jason is back in the movie theaters.

Just a coincidence, I kept telling myself.

The Naughty Step

There seems to be a lot of grumbling around the office about the number of timeouts we're getting while putting in the Form 471. And I hear rumblings in the wider community. It's too bad; I had noticed timeouts disappearing. Has someone at USAC been inspired by the epic timeout battles on Supernanny? At least with Supernanny, when the kid gets "the Naughty Step" (so much quainter than "timeout"), s/he gets an explanation, and gets a hug at the end of the timeout. There are just not enough hugs in the E-Rate program.

Who's bleeding now?

Everyone seems pretty sanguine about the prospects for the E-Rate program under Obama and his pick for FCC Chairman, Julius Genachowski. So, of course, I'll take the contrarian view.

I'll start by talking about how the E-Rate managed to survive the Bush presidency and Rep. Joe Barton, who openly campaigned for it's demise. When Bush arrived in office, he wanted to end the E-Rate. What stopped him? I think it was the discovery that the funding never goes into the Treasury, so abolishing the E-Rate would not have freed up money for other priorities. And since the E-Rate brings money into every Congressional district in the country, Congress is reluctant to just kill it. Seeing that he couldn't outright kill it, Rep. Barton correctly reasoned that if he could get the E-Rate into the Treasury, he could "bleed it dry": once the E-Rate was just one of many competing priorities, it could slowly be cut and cut and cut. He was working on that until he lost his chairmanship when the Democrats took over the House.

Now here comes the Obama presidency, and everybody's happy with his new pick for FCC Chairman. They're both tech-friendly, and Genachowski even helped pen the original Report and Order. And Obama's Technology and Innovation Plan seems very pro-E-Rate. It sounds like he's going to expande the E-Rate: "Obama will recommit America to ensuring that our schools, libraries, households and hospitals have access to next generation broadband networks. He will also make sure that there are adequate training and other supplementary resources to allow every school, library and hospital to take full advantage of the broadband connectivity." (Will training become eligible? Or is it already?)

Nothin' but blue skies.

So what's that dark little cloud on the horizon?

Well, as more and more programs are paid from the Universal Service Fund, there will be pressure to take money from the E-Rate. How about those rollover funds we get every year? Why not take that unused funding and roll it into funding home broadband connections? I mean, every school has broadband, but most houses don't, so where is the priority? In the past, I worried that the ballooning High Cost program would take funding from the E-Rate. Now it looks like new programs will be competing for Universal Service funds.

How ironic if Rep. Barton's dream of killing the E-Rate comes true because of an expansion of the Universal Service Program.

I've got your maintenance right here

I just saw a request filed with the FCC from a service provider about Basic Maintenance of Internal Connections (BMIC). I don't know how the service provider would feel about me bandying their name about, so I'll just use "SP" to refer to them.

SP correctly identified a basic problem with BMIC: no one gets approval for these contracts in time to cover July, so now they have to decide whether to front the money in the hopes of later approval, or forego maintenance. But the remedy that SP proposes falls short.

SP suggests that applicants be allowed to make an annual payment, then if funding isn't approved, decide what to do at that point. But the math doesn't work: we're talking about 90% applicants, so if they're paying 10% of the contract amount, that will cover just over a month. As a result, in early August the applicant still won't have funding approval, and the 10% payment will have run out.

A single annual payment is half the solution. The other half is to allow applicants to pay get funding for the annual payment even if the contract does not run July 1-June30.

That would allow applicants to set up maintenance contracts to run June-May.

Let me give an example. Let's say the change I'm suggesting is implemented for 2009-2010. In that case, an applicant would sign a contract now to cover June 2010-May 2011, and put it on their 471. In that scenario, the applicant doesn't care if their BMIC FRNs are funded by July 1, as long as they get funded before the end of the funding year.

True, the first year would be ugly: applicants would have to have one contract to cover July 2009-May 2010, and another to cover June 2010-May 2011. But in subsequent years, it would be much better for applicants.

Will you be audited?

Lots of people have been asking how likely they are to audited. Well, I can't say for sure how this year's audits were assigned, but it's a safe bet that it will be similar to last year. So here is a table form the most recent OIG report:

Stratum	Disbursement amounts	Number of applicants	Number of audits	Likelihood of audit
1	Over $10 million	10	10	100%
2	$500,000 to $10 million	468	114	24.4%
3	$100,000 to $500,000	1,780	105	5.9%
4	$10,000 to $100,000	8,086	26	0.3%
5	>$.01 to $10,000	10,101	5	0.0%
Total		20,445	260	0.3%

So an applicant that gets less than $100,000 has very little chance of an audit. Getting over $500,000? You can expect an audit every 4 years.

It's nice to know that the FCC is basically leaving the small applicants alone.