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Wednesday, May 27, 2015

Success? Well, yes, but...

Mostly, I agree with Chairman Wheeler's latest blog post.  But of course, I'm going to focus on areas of disagreement.  It's sort the inverse of the new ESL: I'm not going to list everything I agree with, so if something he said isn't mentioned in this blog post, you can assume I agree with it.  Unless I have disagreed with it somewhere else in this blog or filings with the FCC.

First, the most critical issue: the Chairman used a small "r" in spelling "E-rate."  No, no, no.  As recently as September, he was using the big "R."  What happened?

Next, a disagreement that seems nitpicky, but is kind of important.  The Chairman talks of "supporting cutting-edge, one-to-one digital learning."  From what I've seen, schools have blown right by 1:1 and are passing 2:1 and wondering if it will stop at 3:1 (phone, laptop/netbook and tablet/gaming device).  It's important because it affects the recent excitement about "duplicative" services.  Because a lot of schools aren't going to want student smartphones using the same Internet connection as online testing.  So we'll increasingly see schools buying a separate Internet connection for the students' second (and third) devices (and the Internet connection for testing is actually going to be 2 connections, because if testing gets paused by connectivity problems, it's in the papers).  Unfortunately, the current duplicative policy is based on the mistaken belief that each student has at most one device (and the mistaken belief that a school can rely on a single connection).

I don't see the "pent-up demand."  Here's a table showing what I mean:
Disc. Max. Demand Requested % Requested
20% $ 6,049,500 $ 531,458 8.79%
40% $ 338,603,400 $ 39,027,526 11.53%
50% $ 444,421,125 $ 68,381,954 15.39%
60% $ 628,483,860 $ 141,881,622 22.58%
70% $ 1,091,851,950 $ 64,178,921 5.88%
80% $ 1,833,255,480 $ 1,351,202,599 49.71%
85% $ 885,083,963
Total $ 5,227,749,278 $ 1,665,204,080 31.85%
The "Max. Demand" column shows the maximum demand for each discount band, from a spreadsheet I made back in June.  The "Requested" shows what applicants actually requested, based on USAC's Demand Estimate.  It's a bit of a blunt instrument, but it does show roughly how voracious demand was.  Except for high-discount applicants, I don't see a release of pent-up demand.  The 80-90% applicants went after it a bit, but requests have been over $2 billion in recent years, so I don't think $1.3 billion is big.

Ooh, some example applicants, those are always fun.

How did Kindred, ND get selected?  I just wonder what made them the poster child for small rural C2 requests.

The application hasn't been through PIA, so I'm not going to discuss what I think of the equipment in the request or what it costs, but I do want to point out one thing.  According to the 471, the Kindred school district has 689 students, giving them a C2 budget of $103,350.00, so the total pre-discount charges of $98,725.00 fits in nicely right?  Nope.  Unfortunately, the high school only has 299 kids, so it only has a budget of  $44,850.00, and since the district opted to split the cost evenly between locations, each location has a pre-discount cost of $49,362.50.  So right away, PIA is going to knock $4,512.50 off the pre-discount amount, which means Kindred loses $1,805.00 in funding because the FCC decided that $150-in-5 budgets have to be divided by location.  In general, does anyone think that an elementary school with 390 kids really needs 30% more C2 funding than a high school with 299 kids?  Because that's what the rules say.

And you know what Kindred's E-Rate funding will be in 2 years?  $0.  Because their C2 budget is almost used up, and their voice discount will drop to 0% by then.  OK, so they'll still get funding indirectly as part of the big ND School Net consortium, but they will no longer be filing a 471.  Actually, I guess that's what the FCC wants: everything through a consortium.

The Philadelphia School District gets mentioned, too.  Yes, that $5.7 million will help connect their kids to Wi-Fi.  But in the 5 funding years before that, the average annual request was $6.3 million.  And the overall average since the start of the program is $16 million per year.  So $5.7 million is only exciting if you're thinking of the last 2 years, when the FCC decided not to fund any P2.

Philly shows us another dark side of the per-location $150-in-5 budgets.  Open their application, go to the Item 21 information, and expand everything.  The relatively simple purchase of some wireless gear has exploded into a bookkeeping nightmare.  Imagine an auditor trying to figure out if the amount listed for each school was used in that school.  And what did we gain from all that complexity?

I have to admit, though, that the FCC's demand projections were better than my doom-and-gloom.  And the reforms are driving funding to broadband and Wi-Fi.  So overall, I think the Chairman has a right to crow.

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