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Sunday, April 20, 2014

Whither P2?

USAC has released the Demand Estimate for 2014-2015, which gives me another opportunity to speculate on the denial threshold for Priority Two funding.  The important demand figures, in billions:
Denial rate
Demand 10% 20%
P1 total $2.60 $2.34 $2.08
P1 plus 90% P2 $4.30 $3.87 $3.44
P1 plus 80-90% P2 $4.75 $4.28 $3.80
The funding cap is set at $2.41 billion.  So P1 is covered.  However, even if USAC denies 20% of applications, which would be an unusually high percentage of denials, we'd need over $1 billion to cover P2 for 90% applicants, and $1.4 billion to reach 80%.

Chairman Wheeler promised an extra $2 billion in funding over the next two years, probably by trimming reserves to give a bigger rollover.  So there's our billion.  Except I have to think that the Chairman wants to save most of that $2 billion for 2015-2016, when the new rules will mean none of that money gets spent on old voice systems.

On the other hand, I have speculated that the FCC may stretch the ADA exemption to allow them to oversubscribe the fund.  Because approvals are always significantly higher than disbursements, the FCC could direct USAC to approve more funding than it expects to have, knowing that actual disbursements will be lower.  That would probably let the FCC cover all P2 requests (once you've paid for 80% it takes almost no funding to run the table).  But doing so would be pulling money from future years to pay for P2 in 2014-2015, and I just don't see the FCC doing that.

So in my analysis, it basically comes down to what kind of mood the FCC is in.  Since they denied all P2 funding in 2013-2014, I'm betting they'll do the same in 2014-2015.  But I'm not putting much money on it.

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