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Saturday, February 08, 2014

No P2 for you!

It's almost official: USAC has recommended to the FCC that all FY 2013 Priority Two funding requests be denied.  I don't think anyone is shocked, but I kind of thought the FCC might pull one out of and save P2 for at least the 90% folks.  And I guess they still could, except USAC says they've only got about $600 million to rollover, and they'd need $1,600 million to cover P2 from the 90% crowd.  And I'd guess the Chairman will be saving that rollover to meet his commitment that all P1 applications for FY 2014 will be funded.

P2, we hardly knew ye.  Well, actually, the majority of applicants never knew ye, since P2 funding only ever went to high-discount applicants.  (Yeah, yeah, I know, FY 1999 and FY 2010; don't get me started.)  And lately, even the high-discount applicants only saw P2 funding twice every five years, so they weren't too familiar with it, either.

This is bad news for high-discount applicants, though I've noted that they were able to solve the problem by purchasing costly P1 services to supplant P2 equipment.  It's really bad news for equipment suppliers.  For years, this program has been like a dream for equipment salespeople.  Not only could their clients buy more equipment than they normally would (with the 2-in-5 Rule shortening replacement cycles).  Even better than the increased demand, the 90% discount meant that applicants didn't really care about price.  So salespeople didn't have to trouble themselves cutting their commission to make a sale.

It's also bad news for equipment manufacturers, especially manufacturers who have positioned themselves as high-quality (and high-price) suppliers.  Without that 90% discount, schools and libraries will start looking harder at whether they need to spend twice as much to get features they'll probably never use.  (Phone system manufacturers

So what are equipment sellers to do?  One solution for them is the per-student funding plan.  It doesn't preserve the current all-you-can-eat gluttony of some high-discount applicants, but at least it means some equipment can be purchased at 90% off, benefitting high-margin manufacturers and suppliers.

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