Reading the Pai leaves

Reading this week's Funds for Learning Guidenotes, I learned of a letter from Chairman Pai to Senator Nelson, in response to a letter from the Senator, concerned about the Chairman's rescindification of an earlier report.

First, of course, the most important issue: the capitalization of the "R" in "E-Rate."  Faithful readers will know I have for years been keeping track of this for years.  The Chairman used the big "R"!  Our proud program deserves nothing less.

As I mentioned in a comment in February, some senators were not pleased that Chairman Pai rescinded and revoked an earlier E-rate Modernization Progress Report.  The first letter of concern came from Senator Bill Nelson.  [Is it just me, or does he look an awful lot like Michael Palin?  Looking at his web page, I can just about hear him saying "pining for the fjords."]  The Senator's letter didn't say much other than "Hey! Watch it, pally. Step away from the E-Rate funding."  The Chairman's response was basically, "No, no! I was just trying to polish it! I would never dream of damaging such a beautiful thing.  Let's make it even more beautiful!  I only revoked that report because it was released without the approval of the majority of Commissioners [which would have been impossible because Commissioner Rosenworcel's reappointment was being stonewalled by the Senate, so the Commission was split 2-2].  The revocation wasn't because I don't like the report."

But I'm digging deeper, reading meaning into the Chairman's words that he probably never intended, and giving my irresponsible response.  To wit:

• "Four years ago, I said that 'E-Rate is a program worth fighting for.'"  Yes, he did.  And it's nice to hear him say it again.
• "student-centered approach":  I'm not as excited to hear that repeated.  The Chairman has in the past used "student-centered" when he's talking about per-student formulaic funding.  I've been consistently ambivalent about formulaic funding since 2005.
• "complicated, outdated priority system": Well, technically it's now an updated "category" system, not an outdated "priority" system, but point taken.  I don't like the categories either, but removing them will create winners and losers.  It is certainly involved in some ridiculous complexity, but I would argue it's not the source of the problem.
• "streamline the E-Rate funding process":  Hear, hear!  Call me, I have some ideas.
• "obtain funding without having to fill out seven different series of forms...": Yes!  Wait, 7 series of forms?  I'm assuming he meant "series of seven forms," but what 7 forms is he talking about?  Well, there's the Unavoidable Three: 470, 471 and 486 .  If you don't want (or can't get) discounted bills, you'll need the 498 once and the 472 annually.  Then there's the 479 and 500, though I'll bet most applicants don't even know those exist.  Let's not forget the numberless form that you have to fill out to get an FCCRN.  And then there are the not-quite-forms-but-submissions-with-required-fields: BEN creation, service substitutions, SPIN changes, RAL corrections, appeals, etc.
• "...or spend...funds...on outside consultants":  Hey, now!  I resemble that remark.  The Chairman doesn't like consultants, but I think it's a waste of time to focus on cutting out consultants.  We're not a problem, just a symptom.  Truly simplify the program, and fewer applicants will need consultants, and probably pay less if they choose to use a consultant.  But is there any way we can just keep making the program more complicated until my youngest gets out of college?
• "end the incentives for wasteful spending":  Yup.  To start, cut the top discount from 90% to 65%.  And then maybe look at the recommendations of the WFA Task Force from 2003.
• "distribute funds more fairly":  Beware government officials saying "more fairly"; what it really means is "more in agreement with my priorities, which I'm not sure you'll agree with."  Everything government does involves taking something from someone and giving it to someone else, so every government action seems unfair to someone.  Based on the Chairman's past statements, I think what he really means is "give more funding to rural applicants."  To me, that's not more or less fair.  Let's be open about what the priorities are for the program, and then distribute funds according to our priorities.  But don't call it "fair."
• "much more transparent":  I'm all for that; the secrecy in this program is astonishing.  You want to get rid of consultants?  End the secrecy.  How about starting with publishing the 700 pages of secret rules?  And then create a book with all the rules.  And implement a recommendation from the Report on FCC Process Reform: "developing a detailed inventory of pending matters, and, over time, making that inventory public."  That means publishing a list of appeals currently pending at the FCC.  I hope this means the Chairman is abandoning his idea that the way to make new rules could be: "my four colleagues and I could all get together in a room and try to hammer out a deal."

So I like most of what he said, and I don't hate any of it.  Of course, that's often the way things start out in government, and then it gets down to the nitty-gritty and suddenly no one likes it. But you know what I liked?  Not a whiff of a suggestion that the program needs to get smaller.  Of course, if I were the Chairman trying to reassure a Democratic senator, I wouldn't mention my parsimonious desires, either.

Index? What index?

At first, I thought, "Oops!"  Then I thought, "Wait a minute!"  Then I thought, "What the hell?"  Then I thought, "Holy crap!"

Earlier this week, I blogged about the increase in the $150-in-5 cap to $151.50 for 2017-2018 due to an inflation index, and whined about how the increase was lower than it should have been.  Then today, I read on Funds for Learning's site that the increase to $151.50 was for FY 2016-2017 (a 1% increase), and the FY 2017-2018 cap was increased to $153.47 for  (a 1.3% increase).  "Oops."

But "wait a minute," I was sure that wasn't what E-Rate Central said.  I checked, and while they have the correct information up now, they do have a footnote acknowledging that they had earlier had the info I used for my reckless blog.

"What the hell?"  Why are we finding out about this because E-Rate Central noticed that the Category Two Budget Tool was using $151.50 for FY 2017-2018?  The FCC has said nothing.  USAC has said nothing.  How is it that this change is being made without telling anyone?  How is it that this change was made last year without telling anyone?  Why are we forced to rely on E-Rate consultants to make this public?

"Holy crap!"  Why didn't anyone notice the increase for FY 2016-2017?  Because it didn't happen.  USAC used $150/student to calculate FY 2016-2017 C2 budgets, and forced applicants to reduce their funding requests to fit under $150/atudent.  Wow.  All those applications were incorrectly reduced.

But what now?  For most of those applications, it's been more than 60 days, so the reduction can't be appealed.  And technically, PIA didn't reduce the applications.  They just told the applicants that they were over budget, and made the applicant tell them what they wanted to remove from the request.

If USAC correctly handled requests that are over budget, the fix would be simple.  See, what PIA does now is say that if a request goes over $150/student, the excess is ineligible.  Wrong.  It's still eligible, just over cap.  It should be handled the way USAC handles invoices that are over the committed amount; you put the full amount on your invoice, and USAC just says, "Yeah, we're only giving you what you were approved for."  Likewise, in the case of a request that exceeds the $150/cap, the Committed Amount should just be reduced to the cap.  If USAC had just done that, they could now just say, "OK, we'll just up those FRNs to what the cap should have been."  That wouldn't be a complete solution.  Those applicants that reduced the size of their request before applying would still be screwed.  But at least some of the damage could be easily repaired.

By the way, I checked the Category Two Budget Tool, and it looks to me like it's currently using $150/student to create budgets.  Am I missing whatever E-Rate Central spotted, or did someone change the tool back?

I have complained about the secrecy in this program since 2006, but now we've reached a whole new level: rules so secret, even USAC didn't know.

That appealing new system

I had the misfortune of needing to look through the most recent USAC annual report, and noticed something I hadn't before: the number of E-Rate appeals jumped from 447 in the 3rd quarter to 1,191 in the 4th quarter.  Yowza!

Maybe it's a seasonal thing?  Not so much.  The year before the totals were 387 for Q3 and 505 for Q4.

Now what could have caused appeals to double?  I'll give you a hint: it starts with "E" and ends with "PC."

Pittsburgh paranoia

Chairman Pai gave a speech at Carnegie Mellon and said something that seemed good at first, but then got me worried.  Here's what he said: "...any direct funding for broadband infrastructure appropriated by Congress as part of a larger infrastructure package should be administered through the FCC’s Universal Service Fund (USF)...."  

Right off the bat, I was encouraged that the Chairman wanted to see the USF grow.  Then my paranoia kicked in.

Since 2005, I have been harboring a paranoid suspicion that Republicans in Congress want to get the USF into the Treasury so it can be bled dry.  We've been saved by the fact that the E-Rate is not funded by Congress, so money cannot be taken from the E-Rate to pay for other priorities.  But if the Chairman's wish is granted, then part of the USF will be funded by Congress.  Once the USF gets a taste for money from the Treasury....

And then it got worse: "...targeted to areas that lack high-speed Internet access."  Oh, no, is this Commissioner O'Rielly's "no fiber funding for counties that have fiber" idea?   The Chairman then says that programs should "reduce wasteful spending by preventing subsidies in areas where the private sector is already investing in networks, so there’s no risk of government investment in overbuilding."  I don't like the sound of that.  One person's "overbuilding" is another person's "competition."

But then I found hope in a single letter: the "s" in "networks."  Now there's a waste-reducing standard I can get behind: the USF won't fund new fiber if multiple broadband providers have fiber installed that can serve their locations.  Unless, of course, self-provisioning would save money for the E-Rate program.  Oh yeah, that's right: applicants already can't self-provision unless it saves money for the E-Rate program, regardless of whether any fiber is near any of its locations.

And finally, a couple of observations about Chairman Pai's speech, which have nothing to do with E-Rate:

1. The Chairman opened his speech with some banter about the Steelers beating the Chiefs.  Does anyone else think that of all the places in Pittsburgh, the Software Engineering Institute at Carnegie Mellon is the most likely to be filled with people thinking, "Who are these stealers?  And why are they beating chiefs?"
2. The Software Engineering Institute played Blackgate Prison in The Dark Knight Rises.  The Chairman's speech, focused on how to "help bring the benefits of the digital age to all Americans"  was definitely better than Bane's message of chaos.

What's the index, Kenneth?

Inflation is popping up everywhere this week.

First, the FCC has announced the cap increase for the E-Rate program for FY 2017-2018.  Normally, this would be a boring non-event, but I'm a little surprised that the new FCC Chairman is letting the fund grow.  Yes, the inflation index is in Commission rules, but surely some kind of special stay is possible.  More likely, the Chairman knew it's a fight not worth fighting: since the cap was raised from $2.25 billion to $3.9 billion, demand hasn't hit the cap.  So raising the cap 1.3% is meaningless.

What's this in footnote 2?  "This represents a $51,207,000 increase for the E-rate program funding cap as a whole, including a $38,077,000 increase for the category one services funding level and a $13,130,000 increase for the category two services funding level."  Why are they bothering to keep track of the increase to the non-existent $1 billion C2 set-aside?  Oh, it's in the rules.  Well, at least the WCB only wasted 5 minutes figuring that out.  But each year, due to the compounding increase, they'll need more time; in a decade or so, they'll be wasting 10 minutes.  (The draft of the EMO actually set aside $1 billion for C2, but before approval, that was changed to a sort of aspirational guideline.  Now the $1 billion which is not set aside for C2 has increased to $1.01 billion not set aside for C2.)

But here's an inflation calculation I missed.  In E-Rate Central's latest "News for the Week," they point out that the $150 in the $150-in-5 Rule is indexed to inflation.  And they've confirmed that USAC has increased the C2 budgets to $151.50/student.  That's actually not as pointless as calculating the increase to the non-existent C2 set-aside, and will probably have more of an impact than the cap increase  for the whole program.

But the math seems wrong.  They've increase the $150 to $151.50.  But shouldn't they use the FCC's inflation figure of 1.3%?  That would give us a $151.95-in-5 rule.  Is someone skimming that 45-cent difference?  Troubling if true.  Someone should demand a congressional investigation.  I'm kidding.  (Ever since the Dinner Table Rule made it into an NPRM, I feel like I have to make clear when I'm joking.)

I'm assuming that the $9,200/building minimum will also be indexed.  So those tiny schools and libraries that already blew their entire $9,200 budget will get a $119.20 windfall this year!

Eensy-weensy good news all around!

Is Melissa C1?

Some recent sponsored content over at E-school News touts in it's headline "a new E-rate funded technology."  And I'm hearing alarm bells.  Let's have a look.

First problem: the small "r" in "E-Rate."  At least it's better than the old eRate, but I'm still going to mangle the name of the publication until they get it right.

Second problem:
"When virtual routers are bundled together with [advertiser's] Switched Ethernet service, this combination may be eligible for E-rate support as a Category 1 service."
followed by a footnote that says:
"[Advertiser] does not represent or guarantee the eligibility of any service or product."

Yeah, they did say "may be eligible," but still....

Is virtualized router service eligible under C1?  Let's go to the Eligible Services List.

That pesky "basic conduit access to the Internet" phrase is still in there for C1.  Back when the ESL was more descriptive, virtualized add-ons were excluded from "basic."  Now the ESL doesn't have exclusions (except when it does), but I still say virtualized routers are not "basic."

Virtualized router service is eligible: "Functionalities listed above that can be virtualized in the cloud... like routing and switching, are also eligible."  [I know that ellipsis is a sneaky change in what the sentence actually says, but it makes a nice quote.]  Problem is, that's under C2.  So virtualized routers are certainly eligible, but almost certainly only under C2.

And who gets stuck holding the bag if it turns virtualized routers aren't eligible?  The applicant.

Saying virtual routers "may be" Category 1 is like saying

Melissa McCarthy may be the next White House Press Secretary.*
*I do not represent or guarantee the identity of any White House staff.

[Think about it, though.  I'd watch every press conference if Ms. McCarthy were giving them.  The ratings would be HUUUGE.]

And what about Guildenstern?

Is this the final nail in former Commissioner Rosenworcel's term at the FCC?  On February 28th, President Trump withdrew the nominations of Commissioners previously nominated by Obama, and Ms. Rosenworcel is on the list.  No one seems to know why those names were withdrawn.  In the past, the President has looked to Congress for nominees from the opposing party, but that's just a tradition: the President can nominate any non-Republican he wants.  Or, I suppose, nominate no one and leave the FCC with 3 commissioners

Commissioner Rosenworcel's reappointment was blocked by the Senate (after unanimous approval by the Commerce Committee) first by Republicans, then by Democrats, then by Republicans again.

Hey, "borked" became a verb, so maybe we'll be saying that Ms. Rosenworcel got "garlanded." Or maybe we should use "merricked," so people don't think of Judy Garland or imagine the former commissioner festooned with Christmas decorations.  But will "merrick" conjure up the Elephant Man?  Except Ms. Rosenworcel got a confirmation hearing and committee vote, just not a full Senate vote, so she wasn't exactly merricked.

What's going to happen next?  Even I can't speculate.