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Thursday, April 30, 2009

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.

Wednesday, April 29, 2009

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.

Tuesday, April 28, 2009

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.

Monday, April 27, 2009

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.

Sunday, April 26, 2009

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.

Thursday, April 23, 2009

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!

Sunday, April 19, 2009

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.

Wednesday, April 15, 2009

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.

Wednesday, April 08, 2009

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.

Wednesday, April 01, 2009

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.