Just listen to yourself

I don't have much time to investigate the other programs in the Universal Service Fund, but E-Rate Central took a look at a recent Rural Health Care order that might have some implications for the E-Rate.  [The order is just called "Report and Order"; could this be that program's First Report & Order?  Let's all snicker at the USF noobs.]

The whole thing bears reading, but two points seemed to me worth writing about:

First, the discount is being set at 65%, lowered from 85% in the pilot.  Two of the reasons mentioned:

1. "...to ensure that HCPs have a financial stake in the services and infrastructure they are purchasing, thereby providing a strong incentive for cost-effective decision-making and promoting the efficient use of universal service funding."
2. "A 65 percent discount rate will help keep demand for the overall health care universal service...below the...cap."  

Some of us have been citing those two reasons in our arguments to lower the top discount rate in the E-Rate program.  So it's nice to see the FCC endorse the ideas, even if it's not in our program.

Second, the order sets some common-sense procurement rules.  I really liked two of them:

1. You don't need to competitively bid purchases with an annual cost less than $10,000.  I'm guessing that would exempt maybe 60-75% of all FRNs. (The median funding request is $3,000, which means a pre-discount amount of less than $10,000 for all but the 20% applicants).
2. You can use any contract "awarded pursuant to applicable federal, state, Tribal, or local competitive bidding processes" without having to do any competitive bidding.  Buy off state contract, you don't need any bidding.

Those two exemptions would probably eliminate the need to post a Form 470 for 80% of applicants.  Which would save money for everyone.  Apart from administrative costs, applicants would have the flexibility to get the best deal, unshackled from the FCC's ever-growing and ineffective competitive bidding rules.

Maybe I'll just cut and paste a few key parts from this decision and submit them ex parte on the subjects of discount levels and competitive bidding.

CER 0, LCP 2

Another decision related to the earlier reversal of a denial based on a cost-effectiveness review.  USAC denied the funding because it found that over the course of 5 years, the cost of of the firewall/email/webhosting service was more than twice the cost of buying the equipment and running the infrastructure itself.  The service provider pointed out that USAC's cost estimates assumed that there would be no ongoing costs to the do-it-yourself solution.  (I see a lot of people making the same mistake, believing that data infrastructure is "set it and forget it.")  The FCC decided that calculation was not right.

And again, Lowest Corresponding Price (LCP) got a nod.

But how about all the other CER denials that have been piling up for the last 5 years?  It's high time that the FCC did away with Cost Effectiveness Reviews, or at least clarified the process.

Cadere decisis

Could the FCC be reversing the trend of taking years to deny appeals for being filed days late?  In it's latest decision, the FCC actually decides an appeal within the legally required 90 days, and grants the appellant a waiver for filing the appeal 2 days late.  It's like the Bizarro FCC.

Except I can't find any appeal filed on the day the FCC filed that appeal.  I do see an appeal apparently from that school, but it's just asking for a waiver to file the appeal, and it's dated a month earlier.

The moral of the story: if you're going to file after 60 days, include a request for a waiver of the appeal deadline, and give a good reason why you filed late.

Phishing in the Form 470 Ocean

Just a bit of warning.  Some phisher is sending out emails to all the email addresses that were on Form 470s last fall.  Here is the text:

As part of our security measures, we deliver appropriate monitoring of transactions and customers to identify potentially unusual or suspicious activity and transactions in the American Express online system.

Please review the "Suspicious Activity Report" document attached to this email.

Your Cardmember information is included in the upper-right corner of this document to help you recognize this as a customer service e-mail from American Express. To learn more about e-mail security or report a suspicious e-mail, please visit us at http://www.americanexpress.com/phishing

Thank you for your Cardmembership.

Sincerely,

Grace_Saunders

Tier III Support

American Express Account Security

Fraud Prevention and Detection Network

  

Copyright 2012 American Express Company. All rights reserved.

The message comes with a ZIP file, which contains the virus PSW.Fareit.A.Trojan.  According to Microsoft, "PWS:Win32/Fareit.A is a trojan that steals sensitive information from the affected user's computer and sends it to a remote attacker."  So if you clicked on the ZIP file, you had better start drastic action.

Now all the email addresses from 2012's Forms 470 have fallen into the hands of people spreading viruses.

I'll take this opportunity to repeat my call for a new Form 470 that does not allow spammers to download a file with a list of names and email addresses from every 470 in the country.  And, of course, repeat my opinion that the FCC should bow out of trying to force their vision of competitive bidding onto applicants' purchasing processes.

Rush to Judgement

Reading the FCC's latest appeal decision, in my head I heard that Sesame Street song that goes, "One of these things is not like the others...."

The decision deals with 91 requests for a waiver of the Form 471 filing deadline.  The first thing that struck me: all the applications deal with the current funding year, and were filed since October of this year.  A couple of them were filed less than 10 days ago!  The 57 appellants in Appendices A and B, which were granted waivers, are mighty happy about that, but the 33 appellants in Appendix D, who were denied, probably wish the FCC had taken more time to consider their pleas.

The FCC laid out 3 criteria for granting waivers:

1. The Form 471 filed on time, and only the Item 21 attachments or certification were late.
2. The Form 471 was filed close to the deadline, and an employee was really sick.
3. The Form 471 was filed close to the deadline despite delays beyond the applicant's control. 

The poor folks in Appendix D didn't meet any of those, I guess.

Those of you who treat life as a series of word problems are probably now sitting with your hands raised, squirming with the effort of not blurting out the answer, "There is one applicant in Appendix C!"

Gold star for you.

Appendix C is the one thing that is not like the other.  It's an appeal filed six years ago for Funding Year 2004.  What is this hoary appeal doing in this decision?  It's not like it was a similar issue.

Without looking at the appeal, there is a point of interest.  Once again, the FCC has said, "You filed your appeal late, but because USAC erred, we're going to let it slide."  The FCC has in some cases been lenient about appeal deadlines in the case of clear USAC error.  I haven't figured out a pattern on when to expect leniency, though; some appeals of clear USAC error still get denied for not being timely filed.

I looked up the appeal, and I'm kind of surprised it was granted.  It looks like a USAC error, but the appeal was filed well after the funding denial reached the applicant, and the FCC has been pretty tight on appeal deadlines.

I have to agree with the FCC that " it is in the public interest to waive the deadline for its late-filed appeal."  I just wish the FCC's standards on accepting late-filed appeals seemed more consistent.

Unhand that handset

E-Rate Central's weekly update has a great history of the free-handset-with-your-VoIP controversy.  The bottom line: there are still 100 applications twisting in the wind because a service provider liberally interpreted the FCC's statements concerning free cell phones, and the FCC hasn't decided whether that interpretation is allowable.  (Actually, I think the FCC just hasn't decided on the right justification to deny the handsets, but I do tend toward the cynical.)

I don't have anything new to say on the matter, I just wanted to give a shout-out to the E-Rate Central update.  I will repeat my earlier suggestion: in order to be allowed, free services should pass the Ancillary Use conditions:

1. Ineligible features are an insubstantial and inseparable component part of an eligible product or service.
2.  A price for the ineligible component cannot be determined.
3. The product or service is the most cost-effective means of obtaining the eligible functionality without regard to the value of the ineligible functionality.

And as I pointed out earlier, free cell phones do not meet those criteria.  The price for the ineligible component is easily identifiable, the cost is far from insubstantial, and the component is easily separable.  Solve the problem by making applicants identify the cost of "free"handsets (cell phone or VoIP) and remove it from their funding requests.

Or better yet, apply the "eligible location" requirement to cell phone service (as we do for data service to those same devices).  That would make cell phone service ineligible for E-Rate funding.

NSLP deflation

Another pretty graph from Funds for Learning, this one about the number of kids served in various discount bands. The FFL numbers seemed unbelievably high to me, so I looked into NSLP a little.  Turns out the FFL numbers may be in the ballpark, though it is tough to say for sure, because there are a lot of ways to reach a 72% discount.

But I found this interesting tidbit: "Between 16 percent and 25 percent of those whose family incomes make them eligible for free or reduced-price meals are not certified." (http://www.fns.usda.gov/Ora/menu/Published/CNP/FILES/SNDA-FoodServ-Pt4.pdf, page 128)

So discounts should be even higher.

Form 470: fix it or dump it

When the FCC did away with the distinction between Telecommunications Services and Internet Access when releasing the Eligible Services List, they said that the long term solution was to amend the Form 470 so that the form had only one section for Priority One.  So it seems we should be expecting an updated Form 470 in the near future.

I've already made the suggestion here (and SECA has suggested to the FCC), that Funding Year should be removed from the Form 470.  I even made it part of my scheme to fix the anti-compeititive mess left by the FCC's SPIN change rules.

Here's another suggestion: Somehow, the FCC needs to hide the contact information on the form, especially the email address.

Today, I got some spam completely unrelated to telecommunications or technology, sent to an email address that was on a Form 470 filed in 2010, and has not been used since.  Actually, I have watched this email address be abused first by companies that got it off the Form 470, then by companies related to those companies, and then someone sold it to a spammer, and now I'm getting all kinds of email.

It's kind of a tough one, though, since service providers should be able to contact applicants easily.  Maybe the new Form 470 could just provide a contact form that sends an email to the applicant, without revealing the email address.  And USAC could keep a copy of those emails, which might help PIA catch applicants who are not running open competitions.

Of course, I have to mention what I would really like to see happen: abandon the Form 470!

It's on

The dates are finally final:  USAC has announced that the 2013-2014 filing window will be December 12, 2012 to March 14, 2013.  The close of the window is creeping back towards February, which I think is the wrong direction, but mid-March is OK.

This year has been very orderly and timely so far: ESL released on time, window announced in a timely way.  Now if the FCC would approve the PIA procedures before the opening of the window, we would have the timeliness trifecta.  But I'm not holding my breath, because the procedures are generally not approved until after the window is closed.

Imagine if the FCC approved the procedures today.  USAC could approve the first applications before the end of December.  Then we'd see more applicants applying early.  I mean, think about.  If you filed on December 14th, you might get an FCDL in January.  So if you had somehow screwed up, there would still be time to file a new470, wait 28 days, and file another 471.

Hey, a fellow can dream, can't he?

No skincrease here

Another Funds for Learning infogram, delightfully short on text and long on graphs.  The second graph shows the troubling increase in Priority One demand, which reached $2 billion this year.  But I noticed something else: a steady decrease in the share paid by the applicant.  In 2000, the applicant share was 33% of the total; in 2012, it was around 25%.

Why?  I can think of a few possible reasons:

1. Climbing poverty rates: in 2000, 11.3% of U.S. families lived in poverty; in 2011, it was 15.7%.  I've mentioned this before.
2. Applicant sophistication: more applicants are using consultants, some of whom know how to maximize discounts.
3. Applicant abandonment: 20% applicants have thrown up their hands at the ridiculous complexity and secrecy to get a few thousand dollars, and left the program.
4. Entry attractiveness:  Among applicants not participating in the E-Rate in 2000, the higher the discount, the more attractive the program.
5. Incentive inequalities: Let's face it, 90% applicants increase their spending at a much faster clip than 40% applicants, because it costs them next to nothing to upgrade to ridiculous bandwidth.

But I guess we'll never know what really caused the decrease in applicant skin in the game.  Unless FFL can turn it into a graph for us.

CER 0, LCP 1

The FCC's latest appeal decision is not ground-breaking, but I found two things interesting.

First, the FCC overturned USAC's denial based on cost-effectiveness because "the services ... were not two to three times the estimated commercial market price."  It is heartening to see a cost-effectiveness review held to the only cost-effectiveness guideline the FCC has given us (from the Ysleta Order).  It gives me hope that the USAC cost-effectiveness witch hunts will end.

Second, the FCC looked at "lowest corresponding price" (LCP)!  I don't recall ever seeing that in an appeal decision.  Maybe the new emphasis on LCP is more than just lip service.  I'll be convinced when a service provider actually gets punished for not giving the LCP.

Another E-Rate Blog

Hey, I found a new E-Rate Blog.  It's by a lawyer specializing in E-Rate, so it's very factual, if not very fun, or very opinionated.  Worth subscribing to, in my opinion.  Even better, the author consistently capitalizes the "R" in "E-Rate."  That's enough to make me a fan.

Commander Data

Now here's news that of interest to very few people: the FCC has released some E-Rate data in delimited text files.  You can find the data here. (In the ridiculously cluttered interface on that page, hunt for a button labeled "Zip" with a raining-arrow icon, and click on that to download a ZIP file with all the files in it.)

There are 2 data files:

1. OPENDATA_FY2010, which is mostly information available through the Data Retrieval Tool (DRT).
2. FY2010_CommittedFRNs_Block4_Data, which has Block 4 data.

I was pretty excited to see the files, but the result is not as exciting as I'd hoped.

The info I can see that's in OPENDATA that was not already available in the DRT are a field showing if the FRN is under appeal, the date the 471 was cancelled (empty for almost all FRNs), the number of students or library patrons (which I assume is coming from Block 2), and some Rural/Urban info, which I think only flows through from Block 4 in cases where an FRN serves a single location.  All pretty useless.

I've been asking to be able to download Block 4 data since 2006, so that data file would be exciting, except I've already managed to collect this info by other means.  If the data were up to date, and included all funding years, then it would be useful, since it would be easier to collect than the way I'm doing it now, but as it is, I have no use for the file.

I suppose there are very few people who want any of this information and haven't already figured out how to collect it.  And no one will have all that much use for a single funding year of data.

But the FCC made it clear that they intend to expand the availability of data, so this could be the start of something great.

Couldn't happen to a nicer bunch

USAC is calling another audit down on their own heads.  Funds for Learning spotted a USAC RFP for a "risk assessment" audit.  Of course I'm ill-equipped to perform the audit, but I'm happy to supply some of the requested assessments for free.  The list of assessments starts on page 3, and there are 16.  I'll only cherry-pick ones that I can answer without doing any actual work.

(3) Consider the effectiveness of USAC’s E-rate Program procedures in detecting the most significant problems identified in recent E-rate audits....

OK, see now there's a problem right there.  The most significant problems are not identified in audits.  The most significant problems are the ones that put people in jail.  Those are the risks the auditor should be focused on.  The fact that an applicant couldn't find a document proving that the Internet Safety Policy was approved at a public meeting 10 years ago is just stupid compared to a service provider and an applicant employee combining to steal $5 million from the program.

(4) Evaluate GAO’s statement that “[t]he E-rate program’s internal control structure is a product of accretion...."

After careful evaluation, I have reached the following conclusion:  No duh.

(6) Provide specific recommendations on how the application review process might be streamlined....

Here are some recommendations off the top of my head:

1. If you're a public school or library, and the FRN is less than $3,000, PIA review is: nothing.  Approved.  Boom, there goes PIA for half of the FRNs.
2. Cost-effectiveness reviews are just pointless harassment.  Toss them.
3. Toss the 470 and the whole competitive-bidding charade.  It hampers competition and drives up prices.
4. Don't require contracts before the 471 is filed.  It hampers competition and drives up prices.  And oh yeah, it's illegal.
5. Publish the secret 700-page tome of PIA procedures.  Let everyone know what the rules are, and we'll all follow them.
6. If you want third-party verification of NSLP numbers, get them from a third party.  Just sayin'.
7. Every piece of information required to approve funding should be a part of the Form 471.  No attachments, clarifications, etc.  PIA gets the 471, and based on the information collected there, makes a decision.  Yeah, the 471 would have to be ginormous to provide all the information that PIA wants under current procedures, but that's kind of the point.  Force the ridiculous complexity of this program out into the open.  Imagine if the IRS looked over your tax return and said, "Hey, I see you claimed travel to your doctor as a deduction.  Could you send us a list of those trips and any other stops you might have made on the way?"  That's what audits are for.
8. Stop sending out those useless, yet frightening Notification of Form 470 Posted but No Associated Form 471 letters.
9. If you have a beef with a service provider, audit them.  Don't force every applicant to back up every invoice with a slew of bills and/or a service certification month after month.
10. PIA should be required to tell applicants if they're about to lose funding.

(8) Evaluate whether ... audits of service providers, rather than just applicants, should be conducted.

And the answer is: Yup.  Name one case of waste, fraud or abuse that took place without the complicity of some service provider.

(13) ... evaluate whether the computer systems USAC has adopted for inputting and processing applications and invoices is both reliable and sufficiently flexible to incorporate E-rate Program changes promptly and efficiently.

Was it 2009 when Mel said that the entire system was going to be overhauled, which would allow for all sorts of improvements?  Since then, it's been patch, patch, patch.  How many trees died this month to send out duplicate 486 notices?  And we just got a Receipt Notification Letter for a 470 posted 63 days ago.

I'm ever the optimist (stop snickering), so I'm hoping that this audit will provide the grounds for real improvement.  But since it's a one-year contract, I won't hold my breath.

On a tangent completely unrelated to E-Rate, who decided to name a candy bar "Snickers"?  I mean, naming your confection after a snide laugh?  OK, Nabisco had already released "Chuckles," but "Giggles" or even "Chortles" or "Titters" would have been better than "Snickers."

My minimis is bigger than yours

Now this is a step in the right direction.  Actually, it's a giant, jet-assisted leap in the right direction.  Or maybe it's a typo.

Every 6 months, USAC releases a report on audits of the E-Rate program.  If I have a little spare time, I read the whole report, but today I just skipped straight to spreadsheet attached to the report, so I could start grinding my teeth right away.  I've whined again and again about the niggling little amounts that USAC goes out and collects from applicants.  USAC is not supposed to collect if the administrative cost is greater than the amount to be recovered (per the Fifth Report and Order).  Now I have no doubt that the good people at USAC are underpaid, but there is no way that a collection costs less than $276, which is the smallest amount I can see on this report that USAC is trying to collect.

But what's this under 2005?  It looks like 9 applicants were given de minimis exemptions totalling $164,639.  So that means that at least one of those applicants is getting a de minimis exemption for an amount greater than $18,293.  For 2006, the de minimis amount must be at least $2,883 for some lucky applicant.  (For the rest of the years, the de minimis cutoff could be less than $300.  Because USAC only publishes totals for each funding year, there's no way to say what the actual de minimis amount is, only the lowest amount it could be.)

But wait, there is some other applicant in the 2005 column in the early stages of collection for $7,465, and 2006 has the $276 collection I whined about earlier.  That means it is mathematically impossible for the same de minimis standard to have been applied to all applicants in those funding years.

Why am I reading tea leaves on this?  Why isn't the de minimis amount published?  Like maybe in the semi-annual report.  And while they're at it, they could explain where in the recovery process de minimis determinations are made.

But I guess besides me, interest from the public is de minimis.

Your grandfather's dark fiber

Hmm, an appeal decision released while E-mpa® and SECA were holding meetings. Channeling my inner conspiracy theorist, I thought maybe the FCC was trying to slide one by while no one was looking.

But no, it's a pretty boring decision.  Actually, I think the ruling adds some clarity on the eligibility of dark fiber.  In 2002.  The order is clear that they are talking about the 2002 rules, so we can't try to extrapolate to today's dark fiber.

It does perpetuate a part of the "Tennessee test" that only a lawyer could say with a straight face: exclusive use .  Boise ISD built a dark fiber WAN connecting their buildings.  USAC said it wasn't eligible because they had exclusive use of the fiber.  The FCC said, "Boise ISD and IDACOMM [the service provider] did not have an exclusivity arrangement limiting the use of the IDACOMM network to Boise ISD."  Now in this case, IDACOMM probably did put dozens of pairs up on the poles and maybe resold them to others, but the actual pair that Boise leased?  The FCC bought the argument that "IDACOMM retains the right to provision new circuits for additional clients on the fiber currently utilized by Boise ISD."  As a practical matter, to whom are they going to sell a circuit that terminates in a school building?  And how are they going to get someone else's light (and therefore circuit) onto that pair?  The dark fiber must be connected to district modulating electronics (otherwise it's lit fiber, which has regulatory consequences beyond the E-Rate), so how does the service provider put someone else's traffic on that pair?

I find the whole "exclusive use" test to be weird, but it's even weirder to apply it to a dark fiber WAN, which does not have a significant amount of equipment on the client's premises.

But it doesn't matter anyway, since the eligibility of dark fiber has changed drastically since 2002.  Twice.

499 ⇒ !CIPA

So as I cried over the misery of applicants trying to get services into the right category on the Form 471, a weird thing occurred to me: in many cases, the need for an applicant to be CIPA compliant is dependent on the regulatory status of the service provider.

See, when CIPA came along, the FCC decided that compliance was not required for telecommunications funding, which is a good thing.  So they did what seemed logical and easy: you apply only for services in Telecommunications Services (TS), you don't have to be CIPA-compliant; apply for Internet Access (IA) or Priority Two, and you need to comply.  And that pretty much worked.  (Yeah, it was a little weird that you didn't need to be CIPA compliant for a T-1 line leased from a telecom company to connect to your ISP, since its only purpose was to provide access to the Internet, but to get funding for a PBX, which could not connect to the Internet, you had to be CIPA-compliant.  But everyone just looked at the sky and whistled and said nothing.)  But then along comes VoIP and the FCC can't make up its mind if it's a "telecommunications service," so you can put it in either TS or IA.  And then fiber is also allowed to straddle.

Let's look at an example of how that might work out in practice.  An applicant wants VoIP service.  In response, they get a bid from their ILEC and their ISP.  Their ILEC files a Form 499, so they can put the VoIP service in TS on the 471.  But their ISP doesn't file a Form 499, so they have to put it in IA.  USAC will decide the need for CIPA compliance based on which box is checked on the 471.  (The new order which tosses out the distinction between TS and IA, says that box is "one of the checks that USAC uses to determine which applicants need to comply with Children’s Internet Protection Act (CIPA) requirements," but I'm not aware of any other checks.  Oh crap, are we going to get a new type of review from PIA?)

So the exact same service may or may not require CIPA compliance, depending on whether the service provider files a Form 499.

That doesn't seem right.

Telecom apples and Internet oranges

Wow!  Usually the release of the Eligible Services List (ESL) is a yawner: the FCC doesn't make any significant changes, and we already know what's coming, because there is an NPRM showing proposed changes.

But this year, the order accompanying the ESL is a bombshell that goes well beyond eligibility.  They have blown up the old "two priorities, four categories" classification of services.  (Anybody else get a mental image of John Noran doing the Vulcan salute when I said "two priorities, four categories"?)

Now, there is only Priority One.  No Telecommunications Services, no Internet Access, to say nothing of the weird troika of categories that was proposed on the ESL, which I suppose would have given Mr. Noran the opportunity to get his thumb involved in trying to clarify priorities and categories, but was otherwise useless.

I made the case that Priority One should be a single category back when the draft ESL came out, but I was more timid than the FCC, suggesting that the Form 470 and 471 should be changed first.  The FCC was more bold, saying that as long as applicants check either of the Priority One boxes on the Form 470, they can get any Priority One services.  I can't wait: putting Web hosting under Telecommunications Services will give me a dirty thrill, and putting POTS lines under Internet Access will feel so edgy.  (I guess this year, Mr. Noran will do the "Vulcan who wasn't careful with the lirpa" salute.)

So up to paragraph 7 of the order, I'm just thrilled: real reform that makes the program easier for applicants!

And then I hit paragraph 8: "When requesting E-rate funding applicants must continue to select the correct category of service on the FCC Form 471."  Oh, crap.  Of course they have to keep the categories on the 471, because of CIPA.  But now applicants have to figure out whether a particular service has to be in the Internet Access category (which means they have to comply with CIPA).  And since the FCC sheared off that kludgy column with the Telecom and Internet textboxes, you just have to kind of know what goes where.

Oh wait, surely there is guidance in the ESL.  Here it is, right on Page 1, with all that other crap no one ever reads: "CIPA Reminder.  The funding of Internet access in the telecommunications services category does not relieve applicants of complying with the requirements of the Children’s Internet Protection Act (CIPA) if the service request includes Internet access."  What?  That's it?!  See for a normal person, E-mail service is not "Internet access."  Neither is "Web hosting."  And there is nothing in the descriptions of either of those services saying, "Whooop!  Whooop! If you're applying for this service, you must check the "Internet Access" box on the Form 471 and be CIPA compliant."  Or is the FCC saying that only actual "Internet access" requires CIPA compliance, and the other services that were under the old "Internet Access" no longer require CIPA compliance?  I don't think so, but that's actually what the ESL says.

Damn, this order was going so well.  I still can't decide if one bad paragraph spoils a whole bunch good.

Proofreader's note: The preamble of the Miscellaneous section still lists the old 4 categories.  That's OK, no one ever reads that part.

Price wars

Well, looky what's in the News Brief: lowest corresponding price (LCP).  As I blogged back in May, LCP is a requirement that service providers give E-Rate applicants their lowest rate.  E-Rate applicants are supposed to get the lowest price for a particular service offered to any other customer in the service area.

LCP has been sitting in a corner, largely ignored by the E-Rate program.  The FCC put the regs in place back when the program started, and then nothing happened.  Ever hear of USAC or the FCC demanding a service provider lower its price to the LCP?  Me neither.

Well, someone at the Justice Department read the regs recently,and  took legal action  in Indiana, Wisconsin, Michigan and New York.  The only settlement so far is with AT&T in Indiana, where the violations were discovered by a lawyer working for the state. Feds 0, states 1.

So a little while after the 2009 Indiana settlement, which cost AT&T $8.3 million, the FCC got a petition from the telecom lobbying groups to "clarify" (meaning "hamstring") the LCP rules.  The FCC quickly responded with a request for comment in May 2010.  And then LCP returned to its dark little corner.

Then on May 1, 2012, ProPublica publishes an article about the failure of USAC and the FCC to enforce the lowest corresponding price rule.  And whaddayaknow, in the service provider training a scant 10 days later, there are several slides about LCP; in previous trainings, there was no mention of LCP.  Of course, since no one at USAC had given any thought to LCP, the slides basically just quoted the regs.

Now a cynic might say that USAC was trying to fill a News Brief, and as it scraped the bottom of the barrel, it came across the LCP slides, reformatted them, and put them in the brief.  But I am even more cynical, which makes me optimistic.  More cynical in that I believe if USAC and the FCC intended to continue to ignore LCP, they would have spiked the News Brief story.  Because applicants who macheted their way through the dense underbrush of regulatory prose discovered an ancient paradise they never knew existed.

Now that the cat's out of the bag, I am hopeful that many service providers will be hit with requests for LCP. Unfortunately, applicants don't have any way to find out what the CPs are, so they can't really tell if theirs is L.

So will USAC start enforcing LCP?  How?  If it were part of PIA, that would reduce demand.  Just sayin'.

Tilting at cell phones

It's not as bad as having to wait a year between episodes of Downton Abbey (two previews are available for those as hooked as I am; both feature Maggie Smith, so they don't disappoint), but Funds for Learning is keeping us all on tenterhooks by releasing the results of their recent poll of applicants in several parts.

The latest release has got me thinking.  The first graph shows which services applicants think are most important and least important.  The winner for least important: cell phones.  I recently commented on the mess that cell phone companies are creating by giving away phones, and FFL's graph has me thinking that the simple solution is to toss cell phones out of the program altogether.  I mean, really, the free phones problem pales in comparison to the problem of usage from ineligible locations.  As long as the location of service remains a criterion for eligibility (and it pretty much has to, unless we switch the E-Rate budget with, say, the Pentagon budget), cell phones are a poor fit in the program.

So as of today, I declare the newest windmill at which I will tilt:

Cell phone service should be ineligible for E-Rate funding.

I just hope I don't suffer retaliation in the form of a dead cell phone.....

An unrelated wry note from the same page:
On both graphs, 14% of applicants rate Internal Connections as the most important part of the program.  Gee, I wonder if that's the same 14% that actually gets Internal Connections....  I'm surprised only 8% rated it "Least Important." Since over 80% of applicants will never see any IC funding, you'd think it would be least important to them.  I guess hope springs eternal.

Pumping irony

And we have a new record: 3,912 days to decide on a request for a deadline waiver.  Faithful readers will know I revel in the irony of the FCC taking years to deny appeals because they were filed a few days late.  This case is a little different, because the FCC actually granted the waiver.  The appeal decision gives a nice synopsis of the case, so it's worth a read, but here's the timeline:

• February 4, 1998: ICN (Iowa Communications Network) petitions FCC to be a common carrier
• February 18, 1999: FCC releases ICN Declatory Order, denying ICN petition
• February 19, 1999: USAC starts denying all Telecommunications Service FRNs involving ICN
• February 26, 1999: applicants start appealing denials
• ?1999: Iowa sues in District Court to get the ICN Declaratory Order overturned
• June 27, 2000: District court remands ICN Declatory Order
• December 2000: FCC reverses ICN Declaratory Order
• November 28, 2001: USAC denies most of the appeals because they were filed more than 30 days after denial
• December 6, 2001: Iowa appeals denials to FCC, requests appeal deadline waiver
• August 21, 2012:  FCC grants appeal

Well, at least it was granted.

Guess who's coming to dinner

A couple of weeks ago, I proposed a harebrained scheme called the Dinner Table Rule.  I was just thinking that the Dinner Table Rule could replace pro-rating if it were narrowly applied.  If there isn't enough funding to cover Priority Two for 90% applicants, then USAC funds the neediest (whoever has the highest total percentage of students eligible for NSLP in Block 4) until the money runs out.  Then all the applicants who were funded can't have seconds until all the other 90% applicants are served.

Yes, it's a crappy system, but it's better than pro-rating.  In fact, it's better than the 2-in-5 Rule.

Plus, can't you just see a little school pleading, "Please, sir, I want some more" and then all the 90% applicants break into a musical number.

Buy your own damned phone

Another area of confusion created by the Clarification Order, which was an attempt to ameliorate the brain seizures we were suffering from trying to figure out what the Sixth Report & Order meant. The FCC tried to right thing by explaining that they weren't going to punish applicants who get a free cell phone from their provider as part of a 2-year contract, just like everyone else on the planet does. Of course, no good deed goes unpunished. A certain VoIP provider (and if you filed a Form 470 last year, you know who I mean) came up with an analogous plan where if you signed up, they would give you a free desk phone.  SECA could see where this was headed and asked for clarification.  The FCC sees the need, and has asked for comments.

Here's my comment to the FCC: get out of the procurement regulation business.

Yep, I'm in full curmudgeon mode today.

SECA has proposed 4 rules, which the FCC parrotted in their Request for Comment:

1. The cost of any end-user equipment provided as a part of a bundled service must be considered “ancillary” relative to the cost of the bundle as a whole; 
2. The bundled service offering must be deemed a commercially common practice within the industry, not a unique offering of an individual service provider; 
3. The arrangement must be currently available to the public and not just to a designated class of subscribers;and, 
4. The service provider is not permitted to offer a package or packages of equivalent eligible services, without bundled end-user equipment, at a lower price.

My opinion of those rules:

1. Here's where it should begin and end: the ineligible free stuff must meet the requirements for "Ancillary Use" as outlined in the Eligible Services List, and be done.
2. OK, but doesn't that stifle innovation?  You can't take advantage of a deal until everyone is offering it?  And what do you mean by "industry"?  The dozen or so companies that form the "school Web hosting industry" all offer a plethora of services which are not available in the wider Web hosting industry.  So if we apply the standards of the wider industry, suddenly all the value-added hosting proposals have to go through the Free Services wringer.  Uh oh, look for a another storm of spamments from the Web hosts' clients.  (I just invented "spamment" to describe the torrent of comments that came in when Web hosts sent their clients a form letter and told them to resend it to the FCC.)
3. This rule kills the free cell phones.  Because those free phones are only available to people signing a new multi-year contract.  Subscribers in the middle of a contract and those who don't want a contract (or can't get one because of their terrible credit history) cannot get a free phone.  So free cell phones are only available to a designated class of subscribers.
4. This is a good idea, but telecommunications companies have so many packages, even they can't keep track of them.  Determining which packages are "equivalent" is a rabbithole I don't want to go down.

Taking a step further back, public entities should not be getting free cell phones, anyway.  Take a look at the state contract in your state, and I'll bet it has month-to-month phone service with phone purchases.  Because the standard cell phone agreement is wrong for a public school or library for a few reasons:

1. Multi-year commitment.  Government contracting officers should not be signing agreements which obligate the government to make payments if no funding has been approved.  A two-year contract is bad government contracting practice.  
2. The public entity owns that phone.  Did you forget to put that $650 iPhone in your inventory, just because you didn't pay anything for it?  And have you been complying with state and FCC rules about disposal of that piece of equipment?  (Hmm, do FCC inventory requirements extend to ineligible equipment that you got for free with a service that E-Rate funded?)
3. The superintendent you're buying service for is pretty likely to leave mid-contract, anyway.  You did remember to get that phone from the last superintendent who left, right?

So the answer to this quandary is: don't allow free phones.  Not cell phones, not desk phones.  Force public entities to do what they should be doing anyway: buying the phone and paying month-to-month.  And force the private schools to do it, too, because I want to see what happens when the FCC tries to force government procurement nonsense on a bunch of nuns.  Those women don't even take crap from the Pope.

Taking a step further back, the FCC could just start enforcing rules about off-campus use of cell phones (there is no exception in the ESL for use of cell phones from ineligible locations), and suddenly no one will be able to apply for E-Rate funding for cell phones.

Striking while the irony is hot

Some of you may be tired of my "isn't it funny how the FCC takes years to deny appeals filed which were a few days late" rant, but this appeal decision is a beaut.  It seems that on March 15, an unfortunate school named Graydon Manor had some of the equipment on their 471 found ineligible.  OK, first of all, if your school is Graydon Manor, rather than appealing to the FCC, wouldn't you just go down into the sub-basement and get Batman to fix the problem?  But no, they appeal to USAC.  The appeal letter is dated April 8, but I guess someone forgot to drop it in the mail, because it was mailed May 13.  That's 59 days after the FCDL was issued.  USAC got it on May 15, which is of course 61 days after the FCDL.  So on June 3, USAC dismisses the appeal as late filed.  The Manor files an appeal with the FCC on June 25, which the FCC receives on July 2.  [By the way, if you search the FCC's ECFS system for Graydon in Docket 96-45, when you click on the link for the Request for Review, you go to some filing by Ventura Telephone.  But the government couldn't hide it from this intrepid blogger.]  On September 13, the FCC tells the Manor to suck ice, since the rules say appeals must be received within 60 days, regardless of what USAC employees may have told the Manor about being postmarked within 60 days, and the Manor didn't offer good cause to waive the rules.  So on October 10, the Manor sends a Request for Reconsideration, which the FCC receives on October 15, which is 32 days after the FCC's decision.  And as I learned not too long ago, Requests for Reconsideration have to be filed within 30 days.  (The deadline for other appeals was increased from 30 days to 60 days on an emergency interim basis due to the 2001 anthrax attacks, but apparently Requests for Reconsideration are immune to anthrax.)

Let's recap the salient points from that pointlessly dense paragraph:

• appeal to USAC received 1 day late, May 15
• Request for Review timely filed, July 2
• Request for Reconsideration received 2 days late, October 15

And yesterday, the FCC issued its decision on the October 15 appeal.  But wait, the above timeline is from 2002.  So the postal service delivers an appeal 2 days late, and 3,505 days later, the FCC says, "Sorry, you were late."

Wow.

Extry! Extry!

USAC has released a Special Edition News Brief that the FCC has set the denial thresholds for 2011 and 2012.
For 2011, applicants at 88% and higher will get funded.
For 2012, applicants at 90% and higher will get funded.
That was fast: the USAC board just approved on Monday requesting those levels from the FCC.

OK, first it's laughable that the FY 2011 denial threshold got set one month after the end of the funding year. The whole idea of funding year has become largely meaningless for Internal Connections projects.  I can't remember the last time a client spent Internal Connections funding inside the funding year for which it was approved.  And applicants at 88% will be getting maintenance funding approved too late to actually spend it.

But the denial threshold for 2012 is almost timely.  It should be set before the start of the funding year, but at least it's close.  At least we all know the threshold for this year before we go into the next application cycle.

Once upon a time, I had a dream of the FCC announcing the denial threshold before the start of the filing window.  Now the FCC could actually do it.  Because I can tell you right now: no one below 90% is going to get a red cent for P2 in 2013-2014.  The FCC can't guarantee that 90% applicants will get funded, but we can all be damned sure that no one below 90% will get anything.

So here's what I'd like to see.  The FCC releases this week The Pro-Rating Order and Notice of Proposed Rulemaking.

The "pro-rating" part would say: "If your discount is below 90%, kiss P2 funding good-bye.  If, as expected, the cap plus rollover funds available as of June 15, 2013 are not sufficient to cover the demand for Priority One services plus demand for Priority Two services from 90% applicants, we will allocate funding based on a pro-rated basis."  That would be so painful that all the proposals in the NPRM would look good in comparison.

The NPRM part would say: "We will never again have enough funding to cover P2 funding for even 90% applicants, so we need to do something.  Here's what we're thinking:

1. Cut the top discount level to 75%
2. Toss some services out of the program.
1. Maintenance is just a headache and a great place to run small scams.  No one understands the rules.  Approvals always come too late.  Wash it all down the drain.
2. Web hosting costs are out of hand.  If the going market rate for unlimited disk space and unlimited bandwidth is less than $100/year, how do the value-added Web hosts keep a straight face when they say 95% of their $10,000/year cost is for Web hosting?  So we'll discount the first $100/year, that's it.  Wait, what are we saying?  $100?  Forget it; hold a bake sale to cover your Web hosting costs.
3. Now that blade servers and virtual machines are all the rage, the eligibility of servers is a moving target and beyond the ability of the human mind to calculate.  Pay for your own damned servers.
4. You can only have funding for cell phones and mobile Internet if you certify that you'll collect all those devices from employees when they leave the building.  Sorry, allowing your Superintendent to check her Facebook page on her ride home is not the purpose of this program.
5. POTS lines are so last century.  This program is supposed to be about "advanced technology." Get yourself some VoIP.  Can't get anything but POTS in your area?  Go complain to the High Cost Fund.
6. Toss Data Protection and be done with it.  We were never sure about firewalls and proxy servers, and anti-virus and anti-spam were never eligible, so why are we paying for uninterruptable power supplies?  And ask an engineer about the advantage of tape backups over a hard disk backup: it's archiving, not backup.  VPNs?  Get real; people are using them for network access from ineligible locations.  Toss the whole category.
7. Get rid of paging services.  No one but custodians has used a pager in 10 years.  OK, so it won't reduce funding demand by much, but it will save some space on the ESL.
8. Look, the only thing eligible under "video" is video distribution, right?  Well, everyone transporting video over their data network, so let's kick video out of the program.
3. Make an adjustment to the cap to compensate for all those years the fund wasn't indexed to inflation.
4. Let's replace the "2-in-5 Rule" with the "Dinner Table Rule": don't take seconds until everyone has had firsts.  So if you get P2 funding this year, go to the back of the line and wait until everyone else has had some.  No, it doesn't solve the funding problem, but it disperses the crumbs more widely.

OK, the Dinner Table Rule is a bad idea.  But all the rest of the ideas are better than pro-rating.

Another thing to blame on the recession

Why hadn't I thought of this before?  A colleague mentioned that the recession is increasing the number of students eligible for free and reduced lunch, and it hit me: a bad economy increases the demand for E-Rate funding.  I would imagine that most schools didn't see a change in their E-Rate discount (if the percentage of eligible students climbed from 12% to 18%, for example, the discount stays at 40%).  But I'd imagine that a significant number of schools saw an increase in their discount.

I wonder what percentage of the increase in funding demand can be attributed to the recession.  I'll have to get my database guy on it next week.

Hraunfoss back with a vengeance

I knew this wasn't going to end well.  Back in 2010 I noticed that something was up with hraunfoss, the server that hosts most of the FCC's documents related to E-Rate  It wasn't being used on new appeal decisions.  And for a while, URLs that had hraunfoss.fcc.gov in them were redirected to transition.fcc.gov.

Now it seems that hraunfoss is fully back in action, and appeals are stored on that server.  So even if the Icelandic waterfall for which the server is named dries up when global warming claims Iceland's glaciers, hraunfoss will live on.  Cyber-environmental crisis averted.

But Houston, we have a problem.  All that content has moved off transition.fcc.gov back to hraunfoss, so anyone who linked to a document on transition.fcc.gov now has a broken link. I guess it's a punishment for doubting hraunfoss.

So I have to find and fix all those links on this blog.  I hope Blogger has a "search for broken links" tool.

There is a schadenfreude silver lining: I'm not the only one with this problem.  It appears that the FCC is OK (because they had their pages refer to hraunfoss, and then redirected browsers to transition.fcc.gov), but the rest of us that referred to decisions during that time used the transition URL we ended up at, not the hraunfoss address that we were redirected from.  So we're all screwed.

Maybe this photo of hraunfoss will bring me serenity.

The 0-in-5 Rule

On Monday at the USAC Schools & Libraries Committee meeting, it becomes official: the 2-in-5 Rule is worthless.  On the agenda for Monday:

1. Approval to Deny Requests for Priority 2 Services at a Discount Rate of 89 Percent and Below for Funding Year 2012.
2. Approval to Deny Requests for Priority 2 Services at a Discount Rate of 87 Percent and Below for Funding Year 2011.

As I've said before, the 2-in-5 Rule does not work and should be rescinded.

The improper and capricious rollover/tossback into FY2010 aside, the vast majority of E-Rate applicants have never been able to get Priority Two funding.  So for almost everybody, it's a 0-in-5 Rule.

I had such hope when the FCC put the 2-in-5 Rule on the chopping block in the May 2010 NPRM, but somehow it survived.

How do we ameliorate the lack of funding?  Cut the top discount rates.  USAC's Task Force on the Prevention of Waste, Fraud and Abuse recommended it in 2003.  I stated my support in 2005 and expanded my support last year.  The State E-Rate Coordinators' Alliance (SECA) said it a year ago.

I think we just missed our best chance to see it happen, though.  As I mentioned in May, the funding crisis this year got people talking about pro-rating Priority Two funding for 90% applicants.  (Under pro-rating, if the FCC only had $300 million left after paying P1, and had $500 million in P2 requests from 90% applicants, the 90% applicants would get 60% (300/500) of what they asked for.)  Now I'm wishing that the FCC had played a little brinksmanship and put pro-rating out there as a possibility.  The cut-the-top-discount-rate proposal keeps disappearing from FCC reforms, which makes me think that some powerful person or group is putting the kibosh on it behind the scenes.  Now if the 90% applicants saw they were only going to get some unknown percentage of what they asked for, they might prefer to take 75% funding rather than get a 40-80% pro-rating of their 90% funding.

Now we'll have to wait at least another year, until the funding shortage gets large enough that the FCC can't fix it by robbing Peter and rolling it over to pay Paul.

Blurry snapshot

Somehow, I found myself looking at USAC's third quarter projections on the USF, released April 26th.  E-Rate geek that I am, I still found it too tedious to wade through the whole thing, but the tables show a few interesting factoids:

1. Historically, disbursements have been 70-80% of commitments.  That's not too surprising.  I would have guessed a little higher.  What surprised me is that P2 disbursements are only a little lower than P1.  I would have expected to see a lot more P2 unused, since they get approved so late.  But I guess it's easier to use service substitutions to ensure you spend all your P2.
2. Only about 20% of 2011-2012 commitments have been disbursed.  Assuming that disbursements will eventually reach the same level mentioned above, that means that about 30% of disbursements that will eventually be made had been made as of April 26th.  Not surprising for P2, but I would have expected more of P1 FRNs to be paid by SPI, and those FRNs should have been about 75% disbursed.  I guess the BEAR rules.
3. For FY 2010, only about 40% of Internal Connections commitments had been disbursed.  Assuming that the percentage will eventually previous levels, that means something like a third of the disbursements had not been made 9 months after the end of the funding year.
4. Total commitments for 2011 was just over $2 billion.  So with the funding year almost over, only two thirds of the funding has been committed.

The promise of a projection

Well, that was quick.  Yesterday, the FCC ordered USAC to rollover $1.05 billion in unused funds into Funding Year 2012-2013.  How quick?  Well, it was just 8 days after USAC announced it had $1.05 billion available.

But wait a minute, take a close look at that USAC announcement.  It seems to be saying that on August 2nd, USAC will be sending the FCC a projection of funding through the end of September, and that projection will have $1.05 billion in unused funding.

So the FCC just approved a rollover based on the promise of a projection of available funding.

We are a long way from the rules created in the Third Report and Order, now contained in Part 54.507 of 47 U.S.C.: "On an annual basis, in the second quarter of each calendar year, all funds that are collected and that are unused from prior years shall be available for use in  the next full funding year." This order fails on three counts

1. We are in the third quarter of the calendar year.  (OK, so it's almost the second quarter.)
2. Since we're already in 2012-2013, the "next" funding year would be 2013-2014.  (Of course, the FCC thoroughly flouted that part of the rule last year with their tossback into a funding year that had already ended.  At least this year they rolled funds into what is almost the "next" funding year.)
3. USAC has not said it has $1.05 billion in unused funds.  The July 10th letter seemed to be saying that next month it will be projecting that by the end of September there will be $1.05 billion in unused funds.  The rule says "funds that are collected," not "funds that will be projected."

But brushing aside the rules, this is good news for the program, since it means we may get Priority Two funding for 90% applicants with no pro-rating.  However, that may take some time.  As I mentioned earlier, the actual total of P1 requests plus P2 requests from 90% applicants is $3.8 billion, so this rollover is enough only if USAC denies 11% of applications.  That's not an unrealistic number, but I would think that USAC would have to deny 11% of funding before it approves any P2 applications.  Since Solix seems to have been focusing on the slam-dunk applications so far, it's going to take some time to deny that much funding.
Or maybe I'm just being pessimistic again.
Somehow, the whole thing conjures up the Star Trek episode "A Piece of the Action":
"Hey, Oxmix, we need more cash to fund P2 requests."
"Well, here's $400 million."
"You need to find $1.05 billion."
"But The Book says...."
"I would advise yous to keep searchin', Oxmix."
"Oh, right.... Let me check my numbers.... Well, whaddayaknow!  We'll have $1.05 billion in a couple of months."

But I'm sure that's not at all how it happened.

Today's breakfast? Crow.

The latest Funds for Learning newsletter has a link to a letter from USAC to the FCC about rollover funds.  The letter says that a total of just over $1 billion is available.  Then the shocker: "We believe such funds would be sufficient to make commitments at the 90% discount level for Priority 2 requests for Funding Year 2012."  Wow, I didn't think that problem would be over so soon.

So borrowing my math from a previous post, for 2012-2013, demand plus P2 demand from 90% applicants totals over $3.8 billion.  The fund cap is set at $2,338,786,577. add $1,050,000,000 from the rollover, and you've got $3,388,786,577.  So the funding is only sufficient to cover the funding if USAC denies 11% of applications.  I think that's in line with historical data, although of course we can't use recent history, since USAC is still working on funding approvals for 2010-2011 (to say nothing of 2011-2012).

So my prediction that the FCC would have to wait until after the funding year to accumulate enough funding to cover 90% applicants was wildly pessimistic.  I can hear the utterances of frequent readers, dripping with sarcasm: "What?!  This blog pessimistic?  Well, I never!"

So the impending no-funding-for-P2 train wreck is put off for another year.  But the train wreck is coming.

Searching for Christmas

The FCDLs have apparently been issued, but we still can't get commitment info through the Data Retrieval Tool.

Yes, I'll be able to get the info tomorrow (I assume), but it just grates that service providers have had the info on Wave 1 since last month, but I can't get it until the day after the FCDL.  It's like telling a kid he can't have his Christmas presents until the 26th, but all his siblings know what he's getting.

I know, I can use Search Commitments, but that tool doesn't even give you the FRN. How could they leave out the database's primary key? How about showing the service provider?  And who wants to see the address, anyway?  While we're on the subject of this tool's shortcomings, the sorting ability is chock-full of flaws:

1. If you have a list that has multiple pages and click on a column heading to sort based on that column, the sort only works for the first page; if you jump to page 2, it is as if you had not sorted.  And if you try to sort any later page, it dumps you back to page 1.
2. If you make a sort, it tosses out any previous sorting.  So you can't, for example, click on "Name," then click on "Discount" to get a quick look at an alphabetized list of 20% applicants.  Once you click on "Discount," the names are randomized.  (I'm betting that FRN is the secondary key in that sort, but I can't say for sure, because I can't see the FRN.  Grrr.)
3. You can't click on a column a second time to reverse the sort order.  So the only way you're going to see all the 90% applicants is to increase the number of FRNs per page so that you're looking at all the FRNs, sort on discount, and then scroll to the bottom of the page.
4. But wait, you can't do that, because you can't look at all the FRNs on a single page.  You can increase the page size, but only in increments of 50.  So for example there were 7,981 FRNs in CA in 2011, but you can only increase the FRNs/page to 7,950.  So if you want to look at the 90% applicants, you're screwed, because if you sort based on discount, 31 of the 90% FRNs will be on page 2, and when you go to page 2, the sort vanishes, and page 2 has 31 FRNs from applicants whose names fall at the end of the alphabet.

Thank goodness for the "Export to Excel" button.

Wave upon wave

Another new record for this year!  Today's USAC News Brief says, "USAC will release FY2012 Wave 2 Funding Commitment Decision Letters (FCDLs) July 11."  So Wave 2 is coming out 1 day after Wave 1.  I don't think I've ever seen back-to-back waves.

This announcement makes me feel better about one of my gripes concerning the FCC's announcement of Wave 1.  See, by announcing on June 28th what would be in Wave 1, the FCC ensured that none of the applications which cleared PIA between June 28th and July 10th will get an FCDL until the second wave of funding, since the amount of the first wave was fixed in the announcement.  So some applicants are actually going to get a later FCDL, just so the FCC could try to save face by announcing future funding commitments before the start of the funding year.  The back-to-back waves all but solve the problem by making the delay only 1 day.

I originally held myself back from commenting on the FCC's announcement, but today I'm feeling the snark.

First, the tone is a crack-up: "USAC releases...Record Commitment of $646 million."  The whole thing reads like a glorious success, when in fact, it's a miserable failure.  The headline should read: "USAC fails to release any commitments by the start of the funding year."  Instead of "More applicants will receive funding commitment decisions in this wave than any other wave in the program history," it should say, "Never in program history have applicants waited so long to receive funding commitments."  And they even make the $5.24 billion in requests for 2012-2013 seem like a sign of a successful program, instead of the beginning of a long, slow, ugly funding shortage train wreck.  George Orwell could not have written it better.

Second, the tense needs to be corrected in the headline.  See, July 10th (or 11th) is in the future.  So the press release should have started with "USAC Will Release...."  They got the tense right in the rest of the release.

By the way, there was one interesting piece of information in the letter: just over half of applications are in the first wave.  The press release says that "USAC will send over 23,800 letters" and that 46,838 applications were received.  So the first wave will fund half the applications, but commit less than a quarter of the funding for the year.  Looks like it's a good year to be a small applicant.

ESL getting worse

Hey, the new draft Eligible Services List (ESL) has been posted!  I haven't had time to look at it, but I'll give my ill-considered opinions based on the press release.

The press release lists 3 changes, which I'll deal with in reverse order.  The Cliff's Notes [for readers under 30, that's what us old fogies used before SparkNotes] assessment of these 3 changes: the first is meaningless, the second is dishonest, and the third is terrible.  Detailed griping:

1. "Commercially available" is back in.  They took it out last year, but put it back in for clarity.  Oh, please.  The lack of clarity has nothing to do with the phrase "commercially available" and everything with the distinction the FCC is making between "telecommunications services," which must be provided by a common carrier, and "telecommunications," which can be provided by any company over fiber.  The ESL makes it sound like I could offer phone service over fiber without being a common carrier.  The distinction is hopelessly muddy, and "commercially available" doesn't help.  Really, what would a "non-commercially available" service be?  If it's not commercially available, how would applicants obtain the service?  This is the worst kind of jargon, because it masquerades as normal English.
2. They removed citations to the orders, rules, etc. which underlie the eligibility rule to "streamline" the document.  Sorry, that's not "streamlining" the rules; it's "obscuring" the rules.  I'm all for simplifying the rules, but I'm opposed to hiding the complexity of the rules.  Because if people could see how complex this program's rules really are, they would demand real changes.  [And until the changes happened, applicants would be scared into hiring a consultant.]  I think every eligibility determination listed in the ESL should have citations that allow applicants and service providers to see the basis for the determination.
3. And now the big one: they want to divide Priority One eligibility into 3 categories:
   1) Communications connectivity
   2) Voice services
   3) Other designated and related services
   Yup, the old "Telecommunications Services" and "Internet Access" categories would be gone.
   And that idea is terrible for the following reasons:
   
   1. The Form 470 and 471 still have the old categories.  So now applicants will have less idea where to put services on those forms.  Any change to the ESL categories should be coordinated with a change in the forms, and since changing the forms involves public comment and OMB approval, it isn't going to happen for 2013-2014.  If the FCC wants to mess with the categories, they should start by announcing a change to the forms, and get that wrapped up before changing the ESL.  The 3 proposed categories do not align at all with the categories on the form, creating more confusion, not less.
   2. The categories suck.  There is only 1 distinction that matters for Priority One: services that have to be provided by a common carrier, and those services that can be provided by anyone.  Once upon a time, that distinction coincided nicely with the "Telecommunications" and "Internet Access" categories.  Then along came VoIP and dark fiber, and now it's all muddy.  But these new categories really stir up the muck, since they each contain both "Telecommunications Services" and "Information Services" (to use the FCC's old terminology, rendered useless by the FCC's inability to decide where VoIP belonged).

What should the FCC do?  Well, if they want to keep categories, they should:

1. Change the Form 470 and 471 for 2014-2015 so that they have 2 categories of service in Priority One:
   1) Services that must be provided by companies that file a Form 499
   2) services that can be provided by  companies that don't file a Form 499
2. Reorganize the 2014-2015 ESL to make clear which Priority One services must be provided by Form 499 filers.

We'll use the Form 499 distinction, because "common carrier" and "Eligible Telecommunications Provider" got too murky, so it will be clearer to distinguish companies by whether they file a Form 499.  That's the terminology used in USAC's SPIN Contact Search tool, so let's try to be consistent.

But an even better solution would be to get rid of categories entirely.  Don't make applicants keep track of the regulatory status of service providers.  Applicants just apply for eligible services, and get funded.  If it turns out that a service that should have been provided by a Form-499-filer was provided by a company that does not file a Form 499, take it out of the hide of the service provider, since they shouldn't be providing those services.  Really, why should applicants have to get involved in service provider compliance issues?

Can Genachowski pull a Lombardi?

So while everyone is focusing on the start of the next funding year, June 30 is important for another reason: it's rollover time.  Thanks to the Third Report and Order, Part 54.507 of 47 U.S.C. now says: "On an annual basis, in the second quarter of each calendar year, all funds that are collected and that are unused from prior years shall be available for use in the next full funding year."

The second quarter ends June 30th.  But don't expect to hear a peep from the FCC.  I've already predicted that the FCC will let unused funds pile up until it can carry over enough funds to cover all the Priority Two requests from 90% applicants for 2012-2013.

At the very least, look for the FCC to run out the clock for the first half, then go into the locker room at half time and try to figure out what to do about this funding shortage.

0 FCDLs? WTF!

It is beginning to look like this may be the first year I can remember in which not a single FCDL (Funding Commitment Decision Letter) will be issued before the start of the funding year.  E-Rate Central's News Brief predicts that funding will be approved this week with FCDLs issued next week.  Well, next week is already July.

I expected FCDLs this week, so USAC (and the FCC) could avoid the eggy face of having no approved funding at the start of the year.  

Why the long delay?  PIA was on the ball this year, and there are a lot of applications that completed review months ago.  The FCC approved the secret application review procedures back in April.  Word from USAC in early June was that they were working on systems issues and awaiting FCC approval to run the wave.  

Maybe having systems issues hold up the first wave so long will light a fire under whoever is holding up the overhaul to USAC's creaky codebase.  Mel Blackwell promised the upgrade in the 2009 trainings, but none of the promised improvements have been made yet.

Don't hold your breath, though.

VPN? NFW!

Really?  This is the suggestion you want to move forward with?

Those who have the misfortune to read this blog on a regular basis (well, I guess I can't really call my posts "regular," but you know what I mean) know I've been turned into a SECA fanboy by this filing and this one.  Both of those filings were full of important and timely suggestions.

Instead of considering those changes, the FCC is asking for comments on SETDA's request to make remote VPN access from ineligible locations eligible.

I didn't bother to comment on SETDA's request because it's so insignificant.  First of all, VPNs are on their way out.  Everything is being webified, so the use of VPNs for remote access is going down.  Since VPNs were never all that well used in schools, it doesn't have to go down much to get to zero.  Second, those few schools with remote VPN access would be able to allow remote access from ineligible locations by claiming ancillary use.  So this proposal deals with an infrequent problem that already has a solution.

But since the FCC is asking for comments, here's mine:

Step away from the VPN.

Remember when Web hosting was first introduced?  It seemed like a good idea. Then a whole cottage industry popped up providing value-added Web hosting with a 10,000% markup.  VPN rules would make remote access to applications eligible, and those same Web hosts would increase their functionality and price.  And new cottage industries would pop up, offering schools functionality they don't need, and the E-Rate funding encourages schools to go for it.

And this proposal increases the digital divide.  Students whose families can afford broadband Internet access and a home computer will have access to school resources.  Students whose families cannot afford Internet access will be denied access to those resources.

Let's look at SETDA's reasons for making VPNs eligible:

1. Give students access to content from home.  First, most of this stuff should be webified without much cost.  Second, if student access to resources from home is eligible, shouldn't the student's home Internet access costs be eligible?  Make VPNs eligible, and you've put an ugly can of worms in the can opener....
2. Filter student access.  The only way that works is if parents agree to allow the school to configure their computer to force a VPN connection and disallow all other Internet access.  See, to get to the school's VPN, the home computer has to go on the Internet.  So the user can access the Internet without ever connecting to the VPN.  Computers can be configured to force a VPN connection, but I'm not going to let my school lock down the computers in my household.  To say nothing of the expense of configuring all those computers.
3. Track student usage.  What?  How are schools going to use data on which websites students and their parents access from home?  I would not be happy to share my children's Web browsing with the school district, and I definitely don't want to share my addiction to online sudoku with them.

What SETDA mentions, but does not state outright, is that this would be useful for districts with 1-to-1 initiatives.  If I were a tech director giving out laptops to students, then I would want to configure them to force them to connect to the VPN and only browse the Internet through the school's infrastructure, both for content filtering and to reduce the chances of the computer getting infected.  So maybe I could see allowing schools to set up remote VPN access for school-owned devices.

But a school with a 1-to-1 initiative and this sort of VPN is going to find itself in the unusual position of needing more Internet access in the evening.  Because student Web browsing is going to use twice the normal bandwidth going through the school VPN (ignoring any overhead from encryption or connection management), because every page a student loads has to come in through the school's Internet connection, then go back out over the Internet connection to the student.  I can't speak for other kids, but mine definitely use the Internet more outside of school than inside.  I think they watch more TV shows on the computer than on the TV.  Those video streams would have to come in from YouTube to the school, then back out from the school to my kids.

Giving VPN access to students from home will force schools with 1-to-1 access to increase their bandwidth to handle their after-school traffic.

Even districts without 1-to-1 initiatives may run into problems.  If a district has reasonably affluent families, then a lot of kids will use the VPN to get at their school files from home.  Junior will want to tweak his PowerPoint presentation from home, and of course the presentation will include lots of large graphic and video files.  That monster .pptx file is going to eat up school bandwidth when Junior opens it and every time he saves.

Schools will have to increase Internet bandwidth to handle all the traffic outside of school hours, which will mean increased demand for E-Rate funding.  We really don't need to increase demand.

So to the extent this change will have any effect, it will:

1. Provide incentive for schools to invest in a fading technology.
2. Increase the digital divide.
3. Increase bandwidth needs, thereby increasing funding demand.

Step away from the VPN.

Who are these people?

Time for retinal scans over at the FCC, because they are just not acting like themselves.

Faithful readers will know that I like nothing better than beating a dead horse, and one of my recurring snarks has been that the FCC never makes its own deadlines, which I find especially ironic when they are denying people for missing a deadline.

So when I began reading yesterday's appeal decision, I started winding up my rhetorical bat: they denied 8 appeals because the appellants missed the deadline.  "Oh, goody," I thought, "plenty of fodder for a tirade on how the FCC never makes deadlines; I'll smack this one out of the park."  I skipped to the appendix to see how many years ago the appeals were filed.

Holy crap!  All the appeals were filed in the last 60 days.  Well, I guess I'll just drag my bat back to the dugout while muttering a defeated "Way to go, FCC."

At least I still have the 2-in-5 Rule and Cost-Effectiveness Reviews to kick around.

Secret Rule Changes

Here's an appeal decision that changes a rule, only no one knows it, because the rule is secret.  I mean, this rule wouldn't even be in the 700-page tome of secret rules.  It is a rule that dare not speak its name.  It's only known to those of us who have watched enough FRNs go into the USAC black box that we can discern how things are done.  And to send something into this particular black box, you had to have had a COMAD recovery, which means few people have much experience with it.

Up to this point, if USAC needed to recover funds (if they COMADed an FRN which already had disbursements, usual the result of an audit), they would go after whichever party submitted the voucher.  So if the service provider filed a SPI, USAC would pursue recovery from the service provider.  If the applicant filed a BEAR, they'd go after the applicant.

That's a little surprising, since in the Fourth Report and Order, which set the rules for recovery, the FCC said, "recovery actions should be directed to the party or parties that committed the rule or statutory violation in question."  But in a lot of cases, it's tough to say who violated the rules, so USAC seemed to be just going after whoever filed the invoice.

I gave a presentation on selecting a payment method yesterday, and I listed this practice as an advantage to choosing discounts over reimbursements; if you choose to have the service provider do a SPI, in the unlikely event of recovery, USAC releases the hounds on the service provider.  I guess the FCC heard me, because the same day, they pulled the rule out from under me.

In this appeal, the service provider installed a bunch of equipment in a charter school and submitted a SPI and got paid.  Later, USAC discovered that the school had closed before the equipment was installed.  Since the invoice was a SPI, USAC pursued the service provider.  (Actually, since the violation occurred before the Fourth Report & Order, USAC properly followed the COMAD Order, which said USAC should always collect from the service provider.)  The service provider appealed, saying it had no way of knowing the school was closed.  And the FCC agreed.

I'm afraid this means that in the future, USAC will feel obligated to try to figure out who was at fault, and pursue that person.  So a secret rule may just have changed.  Of course, we won't know if the rule has changed until we've seen enough recovery cases to discern what rules are in USAC's black box.

Meanwhile, this appeal covers more than half a million dollars in funding that USAC is now supposed to recover from a non-existent school.  Bummer.  And I wonder what happened to the equipment, which was worth $560,498.52?

Back to the Funding

Hey, I just noticed something that I had forgotten.  Not only did FY 2010-2011 benefit from the heinous rollover/tossback, it also benefited from a rollover/forward pass.  Back in July 2009, the FCC was swimming in dough, so they loaded $100 million into the DeLorean and sent it forward to 2010-2011.  And then in August 2011, sent the DeLorean back to 2010-2011 with a blank check.

Perhaps it's a gift to Michael J. Fox for his 50th birthday on June 9, 2011.

Hmm....  Is it a coincidence that Whittier High School (the real building used for the Hill Valley H.S. scenes) had some large Priority Two requests at 80% in 2010-2011?

How about them apples?

At first glance, it looks like a really boring appeal decision: waiving the filing deadline for a slew of applicants who filed a little late, denying several who filed more than a little late.

But here's what's different: of the 74 appeals decided, 68 were decided within 90 days.  And all but 2 of the appeals were from 2012.  For those of you who missed my earlier sniping, the FCC is required to decide appeals within 90 days, but almost never does.  In this case, they did for the vast majority of applicants.

And 2 of the appeals were decided in 8 days!

The really great part about this is that it allows the applications to go into the PIA pile before the start of the funding year.

This might even be a first: I'd bet that the FCC has never before decided an appeal of any kind before the start of the funding year in the appeal.

The one bad apple: an appeal that's been sitting for over 6 years.  And that looks to be a beaut: a district filed a 470 on paper, sent it certified mail (and got the return receipt), but USAC lost the form.  So they apparently never filed a Form 471, waiting for the FCC to waive the deadline.  So now do they need another waiver to file the 471 6 years late?

But I don't want the one bad apple to spoil the FCC's good work in getting these appeals decided in such a timely manner.