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Friday, July 18, 2014

Popping a cap in competitive bidding

[Note from the future:  Now that the Order has been released, I see that I was mistaken about the 5-year budget.  I thought you just applied for the $150, then spent it over 5 years, but the reality is that the FCC has temporarily replaced the 2-in-5 Rule with a $150-in-5 Rule.]

I was trying to wait for the 7R&/EMO to actually come out before commenting further on policies, but I can't get this new five-year C2 budget out of my head.

It's such a good idea.  Applicants should always have gotten a chunk of cash that they can spend any time in the next 5 years.  Too bad it's a rationed chunk, but the per-student/per-sq.ft./per-toilet [tee hee! I got to say "toilet" again] cap is a separate rule.  The multi-year budget is a good idea.

But I don't see how it can work.

One positive outcome of the 5-year budget is the death of the tech plan.  The FCC couldn't have kept a straight face when saying, "We'll give you equipment funding for the next 5 years, but your spending has to be based on a tech plan, which can't be longer than 3 years, because no one should be planning tech purchases more than 3 years out."  I've been calling for the abolition of the tech plan since 2007.

But I can't imagine how the FCC is going to make the 5-year budget work with it's competitive bidding rules.  Are they just going to hand out $150/student (or $2.30/sq.ft. or $6,000/location or whatever per-location minimum they end up setting) without any list of equipment or competitive bidding?

The alternative is to force districts to guess all the equipment they'll need over the next five years, then bid it out and lock in with one service provider to come up with a fictional budget.  Then as the years go by, every time the applicant wants to actually buy something, they have to do a service substitution because the equipment they listed years ago is at best outmoded and at worst no longer for sale.  And unless the FCC changes the heinous SPIN change rules, the service provider will be able to set whatever price they want, protected from even the possibility of competition.

In a nutshell, the applicant is listing a bunch of equipment they won't end up ordering, getting pricing on that, picking a service provider based on that, and then later paying whatever that service provider wants for a different list of equipment.

Well, they could force applicants to file a Form 470 for all service substitutions, and allow SPIN changes based on that.  I suggested that as a work-around to the 6R&O SPIN change rules back in 2011.

Wait, a 470 every time you want to do a service substitution?  What am I saying?

Here's what should happen, sort of following a purchase process I suggested earlier:
  1. Applicants come up with a list of what they intend to buy, so we can pay the employees of a for-profit subsidiary of the phone companies' association (that's who runs PIA) to discover that SRST module on your router and reduce the funding request by $100, which will be totally pointless, since all my clients will be submitting requests costing at least $300/student, so PIA can chop all they want, and we'll still hit the $150/student cap.
  2. Applicants get a quote on the equipment, and based on that quote, USAC allots them a budget.  Unless the applicant is foolish, that budget will be $150/student.
  3. Don't force applicants to sign contracts.  The E-Rate process already forces applicants to sign illegal contracts, but forcing them to sign contracts for equipment that won't be delivered until years later is really too much.
  4. When it's time to buy the equipment, the applicant gets some quotes and picks a vendor.  (You want to force them to file a Form 470, fine, but that only drives up costs.)  
Now the question is, why are we going through steps 1 and 2?  In the hopes that some hapless applicant, trying to guess its equipment needs for the next five years, will come up with an amount less than $150?  Or that some applicants will foolishly come up with a list of equipment based on the $150/student budget, and then we can pay PIA to force them to cost-allocate out ineligible features so that the budget drops below $150/student?  Increase administrative costs so we can punish the honest and naive.

Just give out $150/student and $2.30/sq.ft. until the money runs out.  True, we wouldn't reach the vast majority of applicants, but that will be true anyway, until the Chairman decides an increase in the size of the fund is warranted.  Then have PIA (or the new Strike Force) bring down the hammer in step 4.

And here's an unintended benefit: more libraries will apply.  Right now, libraries don't apply because either 1) they don't want the hassle, or 2) they don't want to surrender their patrons' rights to comply with CIPA.  Since taking away is a stronger incentive than giving, if you give libraries $2.3/sq.ft., but tell them you'll take it away if they don't knuckle under to CIPA and apply, library participation will increase.

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