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Sunday, April 20, 2014

2-in-5 is 0-10

Another year, another failure of the 2-in-5 Rule.  Or should I call it the Two-in-Fail Rule?  This year, I'm going to have to go a little further into the data to show it's failure, so strap in.  I've been on an anti-2-in-5-Rule campaign since 2007.

The main purpose of the 2-in-5 Rule is to reign in Internal Connections funding requests among applicants with a 90% discount.  Anyone below 80% is subject to the 0-in-5 Rule, and those between 80-89% get the ?-in-? Rule, since they can't tell when they'll get funded.  (Well, they can be pretty assured they won't ever be funded again unless the rules change, but that's a recent development.)

According to USAC's Demand Estimate for FY 2014-2015, Internal Connections funding requests are down 2%.  But Basic Maintenance requests from 90%ers plummeted by 24%, which is only the second time since 2008 that the number's been negative.  So the part of Priority Two demand not covered by 2-in-5 plummets, while the part affected by 2-in-5 basically holds steady.

A drop in the P2 demand from 90%ers is not surprising.  Going into the 2014-2015 filing season, the conventional wisdom was that Priority Two was not likely to be funded even for 90% applicants, so some applicants decided it wasn't worth applying, since the Form 470 process increases costs.  The 0-in-5 Rule is now suppressing P2 demand from 90% applicants.

I had high hopes when the big NPRM came out last July: the FCC sought "comment on whether we should revise or rescind the two-in-five rule...." (paragraph 144)  (Of course, then they went on to suggest the 2-in-5 Rule might be replaced by the Dinner Table Rule, so it wasn't all rosy.)  And the latest Request for Comment acknowledges that "Commenters generally agree that the rule that the Commission adopted limiting any school or library to two years of priority two support in every five year period (the two-in-five rule) does not appear to have achieved its intended goal of substantially spreading the available funds."(paragraph 9).  But a mere 5 paragraphs later, the Commission suggests doubling down and instituting a 1-in-5 Rule.  All the reasons I gave for not liking the 2-in-5 rule apply to 1-in-5, only more so.  But the 1-in-5 Rule is better than the Dinner Table Rule, which is the next idea in the RFQ.

Practical considerations aside, why is Internal Connections in the E-Rate program?  The idea is to provide an incentive for schools and libraries to purchase the equipment necessary to use the Priority One services they purchased, right?  The thinking is that left to their own devices, applicants would underfund their network, leading to insufficient and aging equipment.  So by subsidizing the equipment, the E-Rate provides an incentive to keep the network well-equipped and up-to-date.  That's good.  However, the Commission seems to feel that some 90% schools were taking it too far, constantly replacing perfectly serviceable equipment with the latest and greatest.  So think about it: if you provide an incentive to encourage a certain behavior, and you find that you have been too effective, what do you do?  Reduce your incentive, right?  In this case, cut the top discount level.  It makes no sense to give applicants such a huge discount that equipment is essentially free, then dream up all kinds of rules (2-in-5, Cost Effectiveness Review, equipment transfers, etc.) to keep applicants from over-buying.  The problem is the 90% discount, so the solution should be to change the 90% discount.

And really, I don't think the excessive spending by 90% applicants was mostly the result of them buying equipment too frequently.  Replacing equipment is a major disruption for the applicants and a lot of extra work for district staff, so I doubt there are many cases of applicants replacing equipment more quickly than every 3 years.  The problem is that when those applicants do upgrade, they overpurchase.  The 2-in-5 Rule does nothing to prevent overpurchasing.  In fact, it contributes to that overpurchasing by forcing applicants to buy everything they might need for the next 3 years.  The 1-in-5 Rule will increase overpurchasing even more.

90% is too close to free.  Cut the discount.  The 2-in-5 Rule will be unnecessary.

1 comment:

  1. Good grief, the 2-in-5 Rule is spreading! The California legislature has passed a law saying that football teams can have full-contact practice only twice a week.

    My prediction: just like E-Rate applicants going on buying sprees twice every five years, teams will move all contact drills to those two days, making football more dangerous. Kind of like the way the 2-in-5 Rule drives up spending by forcing applicants to buy whatever they might need in the next 3 years, not what you actually need.

    Like the E-Rate, the football 2-in-5 Rule targets the wrong thing: only a third of concussions occur in practice, and there are at least 5 times as many practices as games, so a game is 15 times more dangerous than a practice. Restricting practice misses the core of the problem. Similarly, E-Rate's 2-in-5 Rule does not address the key problem: 90% is too close to free.