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.

Priority Two tangle

We were talking at the spring E-mpa® (E-Rate Management Professionals Association) meeting about the possibility of pro-rating, and it occurred to me what is actually going to happen.

Any applicant that gets a pro-rated approval in 2012-2013 is going to re-apply in 2013-2014 for the same funding, because there is a chance that they will get approved with no pro-rating.  Then they'll put the pro-rated approval on ice until they get approval on the 2013-2014 FRN, at which point they will cancel the pro-rated FRN.

We are quickly reaching a situation where we won't have a realistic picture of P2 demand until the funding year is over, and P2 FRNs will be approved long after the funding year is over.  The number of 2012-2013 FRNs which are just duplicates of as-yet-unfunded 2011-2012 FRNs is triple what we've seen in previous years.

That is, if we ever see a P2 funding request approved again.

A tip of the cap

Where's Jimmy Carter when you need him?  The FCC released the official notice of the funding cap for 2012-2013.  The cap goes from $2,290,682,250 to $2,338,786,577.  Not exactly going to solve the funding crunch, is it?  We need those double-digit inflation numbers from the 1970s.

So for 2012-2013, supply is up 2.1%, and demand is up more than 21%.  That doesn't take into account the rollover funds; since the FCC was late with the last rollover, look for the amount of the rollover to decrease.  (Unless the FCC violates their own rules again and waits until after the second quarter to make the next rollover, or does another rollover/tossback in 2013.)

Justice delayed

Here's a new one: the FCC granted an appeal that does not result in funding approval, but sets the record straight on the reason for denial.  Seems that a school district was denied because they didn't wait 28 days during their "mini-bid" to select from among multiple award recipients.  The FCC pointed out that you don't have to wait 28 days to run such a mini-bid (in fact, you don't even have to post a Form 470).  OK, but I noticed that the FRNs in question were for Priority Two services at an 80% discount level, and the denial threshold never gets down that low absent a capricious FCC rollover.

So I checked out the appeal.  The applicant knew it wasn't going to get funding, but "respectfully requests USAC update its records to reflect the correct reason for denial of these funding commitments to that of 'demand exceeded available support.'"

I like it: keep your funding, but set the record straight.  The warm feeling of a moral victory probably is somewhat cooled by the fact that the victory was 3 years coming.

Pro-rate the E-Rate?

CoSN (the Consortium for School Networking) has weighed in on the funding shortfall for 2012-2013 in their monthly Washington Update.  They seem more pessimistic than my prognostication: "it appears extremely unlikely that there will be enough funding to fully fund even the 90% level for Priority II applications."  They also raised the pro-rating specter.

Here's a statement I disagree with: "With the Program Year beginning July 1, USAC and the Commission will have to decide quickly on a strategy for handling this funding crunch."  The FCC should decide quickly, but they don't have to, and I don't think it will.  Heck, they waited until 2 months after the *end* of FY 2010-2011 to toss money back into that year.

I expect the FCC to look at the ceiling and whistle, waiting until enough rollover funding accumulates to cover the ninety-percenters for 2012-2013, and then do the rollover.  Of course, the funding year will be over by then, but that seems to be OK with the FCC.  The problem with that strategy is that before the rollover fund gets big enough, we'll see the demand for 2013-2014, and the FCC is going to be looking at the same problem only worse.

I have a cynical new addition to my list of possible reasons for August's funding tossback
4) The FCC depleted the fund on purpose to precipitate the current crisis, so that we can revisit making some services (like Web hosting and telephone service) ineligible for E-Rate funding.  Or maybe make some more fundamental overhaul.

WANtankerous

At the end of last week, we got a few new orders, but only one of them merits some comment.  This appeal involves a school district that leased a WAN back in 2006, and USAC denied them because they said upfront charges could not be paid because it wasn't a telecommunications service.  The FCC said it was a telecom services, so the upfront charges were OK. First, my compliments to the FCC, followed by a snarky comment on a footnote.

Unlike many recent orders, which give no guidance, this order actually clarifies the eligibility of WANS a bit.  Mostly it's just a restatement of earlier precedent, but it does flesh out the FCC's current thinking on WANs a little.

And now for the snark:  Footnote 11 says, "See Billings FCC Form 471, Item 21 Attachment, Funding Request Number 1448250."  Why do I have an issue with that?  Because we can't see that Item 21 Attachment.  Or any other Item 21 Attachment.  Those attachments are not made public, and given that the FCC considers material collected during PIA reviews to be secret, I don't know whether you could even get them with a FOIA request.

Free the Item 21 Attachments!

Three little birds outside my window

So I was talking to an applicant that filed their 2011-2012 window, and it suddenly hit me: does the window matter for 2010-2011 applicants?  In the heinous Rollover/Tossback Order, the Commission tossed an unlimited amount of cash into that funding year to cover all P2 requests.  So I went back to the order, and it looks like out-of-window Priority One applicants are out of luck.  But if you have an out-of-window P2 application, you're in a bit of a gray area.  Obviously, the FCC didn't mean to cover out-of-window applications, but the order says, "We also direct USAC to use funds currently held in the schools and libraries program reserve accounts to make commitments for priority two applicants at all discount levels for FY 2010...."  It doesn't say anything about limiting it to those applicants who filed in window.

Remember, filing out of window is only a problem if the fund runs out of money.  The fund runs out of money every year, so everyone who files outside the window is denied.  But in this case, the FCC has decreed that there be enough money to fund all Priority Two applications, so the window is meaningless.

Or maybe I just need to read that order more carefully.

Lowest corresponding compliance

Now here is something that surfaces every now and then, but I've never blogged about: "lowest corresponding price."  According to FCC regulations, "Providers of eligible services shall not charge schools, school districts, libraries, library consortia, or consortia including any of these entities a price above the lowest corresponding price for supported services...." (47 C.F.R. § 54.511(b))  "Lowest corresponding price" is defined as "the lowest price that a service provider charges to non-residential customers who are similarly situated to a particular school, library, or library consortium for similar services." (47 C.F.R. § 54.500(f))

Every now and then I wonder whatever happened to that rule, most recently when the FCC requested comments on a petition by some telecom lobbying groups for "clarification" (read "limitation") of the rule.

Yesterday, Pro Publica published an article on the FCC's neglect of the rule.  It's a good read.  The article points out that while the FCC has done diddly to ensure compliance with this rule, which I knew, some lawsuits are pending, and the Justice Department reached a settlement with AT&T in Indiana over its failure to give schools and libraries the lowest corresponding price.

I always thought that the rule was worthless, since telecom pricing is like mattresses: you can't comparison shop because the manufacturers purposely create a myriad of products that are very similar, but different in unimportant ways.  Add to that volume discounts, and it's really hard to pin down a "corresponding price."  But if the Justice Department was able to get $8.3 million and a compliance agreement out of AT&T, maybe I should pay attention to the rule.

Hey, is this a way to get rid of the 470?  If the free market works the way the economics textbooks claim, vendors should generally be charging the same price, and it should be the lowest price possible to cover marginal production costs.  So if a vendor is forced to give their best price, that should be the best price there is in the market.

Of course, the free market doesn't work like that in reality.  But since no one in government seems willing to commit the heresy of questioning the perfection of the free market, maybe we could leverage the lowest corresponding price to convince the FCC that competition elsewhere in the marketplace makes posting a Form 470 redundant.

Conversely, the fact that the DOJ and others have pointed out that applicants are not getting the lowest corresponding price is proof that the Form 470 is a dismal failure in promoting enough competition to get the best pricing.

One more thing: if USAC runs a Cost Effectiveness Review and finds that an applicant paid too much for a service, shouldn't the service provider be turned over to the DOJ for not providing the lowest corresponding price?

For once, I'm not the most pessimistic

E-Rate Central's weekly newsbrief is less hopeful than I was in my prognostication: I said the FCC would keep scraping surpluses until they can cover Priority Two requests for 90% applicants, they said that either there will be no P2 funding, or it will be pro-rated for 90% applicants.

Please, not pro-rating.  That leaves applicants having to guess what percentage of total cost will have to come from their budget.

If you haven't signed the petition to increase funding for the E-Rate, do it now.  Please.