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Wednesday, April 19, 2017

The proper definition of a man

Chairman Pai sent two letters to USAC this week, one detailed and dull, and one vague and juicy.  So of course, I'll share a reckless summary and my ill-considered opinions.

First, the detailed but dull.  The Chairman instructs USAC to change the way it determines how large a reserve it must maintain.  It seems that the Chairman is undoing changes that were made in a 2014 letter from the former Chairman.  I think the 2014 letter was fulfilling the then Chairman's promise to "free up an additional $2 billion."  Here's how I see the changes:
Category 2014 guidance New guidance
Pending applications (no FCDL yet) 100% for 3 most recent years
0% for older years
(unless USAC wants to)
Committed, but not disbursed  90%ish  100%
Pending appeals 0%
(I think that's what it says)
So the Chairman is deleveraging the fund.  That's OK with me, but a little surprising, since it means USAC will have to jack the Contribution Factor to cover pending appeals.  Or perhaps the Chairman needs that Contribution Factor jump so he can make a case that the fund needs to be reduced....

Second, the vague but juicy.  The first paragraph is nice, and repeats the "E-Rate is a program worth fighting for" tag line, but the second paragraph starts with "Unfortunately, it has come to my attention...."  Oh, this is going to be good.  The complaints:
  • EPC is a disaster.
    • Not fully operational: invoicing still outside EPC.
    • FCDLs, COMADs, appeal decisions have been delayed.
    • The budget was $19 million, we've spent $30 so far, and the cost could reach $60 million.
  • Lack of USAC transparency with the FCC.
    • USAC didn't tell the FCC that the invoice extension tool was broken, and applicants also couldn't apply for extensions using "Submit a Question," either.
    • USAC is spending more on outreach, and applicants still don't know what to do.
The remedy?  USAC has to promise to:
  • Focus on administration (meaning fixing EPC) before "activities ancillary to proper administration."
  • Be fully transparent with the FCC.  Don't let the FCC get blindsided by applicant complaints.
  • Identify alternatives to be used in case of IT failures.
USAC gets a month to come up with a plan to accomplish those things.

My opinions on the remedies:

I'm in complete agreement that EPC is a failure.  Unfortunately, the Chairman told USAC to "focus first on supporting and completing the basic EPC functionality...."  When it comes to EPC, I'm on the "repeal and replace" team.  I don't think money spent on EPC is money well spent.  I understand it feels bad to dump a system in which we've invested $30 million, but let's not fall prey to the Sunk Cost Fallacy.  Stop spending on EPC, let it limp along, and start building a real portal.  Alas, it's too late to complete development by FY 2018, but let's set a goal of creating a great portal by FY 2019.

"Fully transparent"?  Be careful what you wish for.  The FCC shouldn't try to know everything USAC knows.  First, it will be like drinking from a fire hose.  Second, the FCC should just oversee; if they're going to wade that far into program administration, what do we need USAC for?  The FCC can just contract directly with USAC's sub-contractors.  And hey, FCC, before you start taking a more active role in E-Rate administration, how about you do your own job first?  By which I mean, decide the huge pile of outstanding appeals that has been building for the last 10 years.  Thanks to the changes in reserve requirements mentioned at the start of this blog post, those appeals are going to force USAC to sit on a huge pile of money.  (In his defense, the Chairman has already said he thinks the FCC should meet its appeal decision deadlines, so maybe the appeal backlog is going to decrease.)

"Alternative the event of IT failures"?  Some other ways to express that idea:  "redundant" and "failover" systems.  So the FCC is willing to admit that it needs failover in its own IT operations, but won't pay for failover in applicant systems.  Sauce for the goose?

I was nodding my head while the Chairman was ripping USAC a new one, but once he started on solutions, I found myself shaking my head.

Tuesday, April 18, 2017

School drain, library flight

Another year, another 3,000 applicants leaving the program.  Funds for Learning has released an analysis of the number of applicants posting Forms 470.  What does it show?  Since 2014, about a third of the non-district schools and libraries that were applying have stopped.  But as I've done before, I'm going to look at the total percentage of entities applying for E-Rate.  I'll use data from NCES, and say there are 13,588 districts and 33,366 private schools in the country.  And I'll use IMLS data to say there are 9,082 libraries in the country.  Based on those numbers and FFL's data, here are the participation rates:
2014 2017
Districts 97.2% 84.7%
Schools 25.1% 17.1%
Libraries 43.6% 27.9%

That's a pretty quick drop.  Why?  Here are my speculations:
  1. Voice phase-out.  Many smaller applicants are at the point where it no longer makes sense to fill out the forms.  Because the only service for which they can get E-Rate funding is their cable modem, which might cost only $960 per year.  At a 40% discount rate, that's $384/year in funding.  Let's take the ridiculously optimistic Burden Hours that the FCC put on the forms, it takes 9.5 hours to do the 4 forms.  That would be $40/hour.  But that doesn't count the time spent learning the rules, which are splattered across the USAC Web site (781 pages last time I counted) and FCC orders (over 500 orders last time I counted).  Sorry, just not worth it.
  2. EPC (and that system we had for one year before EPC).  Having to learn a new interface is a big time suck.  Making applicants learn two new interfaces in subsequent years was too much.  I can't say for sure that it drove applicants out of the program, but it certainly got me a bunch of new clients.
  3. The Form 498.  We really had trouble convincing some clients to certify that form because: 1) they didn't want to give out banking info, and 2) they very much preferred paper checks to electronic payments.  Another change that jarred people.
How can we get the participation back up? Here are some suggestions off the top of my head:
  1. Fix EPC.  Even better, burn it down and start from scratch.  Step 1: set a timeline, letting everyone know at least a year ahead of time when the new system will be out.  Step 2: ask users what they would like to see in a portal.  Step 3: release a beta; we consultants would be happy to kick the tires.
  2. Simplify, simplify, simplify.  Get the FCC out of the business of regulating how a school district decides whether to pay $79/month for Internet access to Comcast or FiOS.  Make P2 budgets district-wide. Etc.
  3. Dump CIPA.  OK, the FCC can't just give it the heave-ho, but it seems like someone should point out to Congress that CIPA requirements are keeping a lot of libraries and some private schools out of the E-Rate program.
  4. Can the filing window.  With voice gone, P2 capped and the cap raised, we haven't come close to hitting the funding cap.  Which means we don't need a filing window.  Allow applicants to make purchasing decisions when they want and file when they want.