Pony up for the filters

I'm intending to give a more fulsome review of the new C2 Order, but today I'll single out one thing that seemed wrong: "the Commission has previously explained that the Children’s Internet Protection Act prohibits recipients from obtaining discounts under the universal service support mechanism for the purchase or acquisition of technology protection measures necessary for compliance with the Children’s Internet Protection Act."  Wait, what?

So I went back to the FCC's 2001 CIPA Order, and sure enough: "CIPA clearly prohibits recipients from obtaining discounts under the universal service support mechanism for the purchase or acquisition of technology protection measures necessary for CIPA compliance."

The FCC reached that conclusion based on § 1721(g) of the Act that created this mess, which says: "Notwithstanding any other provision of law, funds available under section 3134 or part A of title VI of the Elementary and Secondary Education Act of 1965, or under section 231 of the Library Services and Technology Act, may be used for the purchase or acquisition of technology protection measures that are necessary to meet the requirements of this title and the amendments made by this title. No other sources of funds for the purchase or acquisition of such measures are authorized by this title, or the amendments made by this title."

OK, I see that CIPA does not authorize the use of E-Rate funds for filtering.  But I don't think "not authorized" means the same thing as "prohibited."  It seems to me that Congress intended to ensure that applicants could use IDEA and LSTA funds for filtering, by overruling any provision that might have prohibited it ("notwithstanding") and to ensure that no one thought CIPA required other funding programs to change in order to allow funding of filters.

At one point, the FCC seemed to have some ambivalence on the subject.  The NPRM for the 2009 ESL wondered "whether [§ 1721(g)] explicitly prohibits E-rate program funding from being used for filtering software or whether the statute can be interpreted so that the Commission is not precluded from funding filtering software through the E-rate program." (paragraphs 14-15)  EdLiNC gave the most complete response, looking at legislative history and all.  Unfortunately, they came out against filtering.  Would EdLiNC reach a different conclusion now that we no longer hit the program cap?  (Back in 2008, any time a new service was included in the ESL, it meant the funding ran out earlier, and fewer applicants got Priority Two funding.)

So I disagree with the FCC.  CIPA does not "prohibit" the use of federal funds for filtering.  The law expressly allows the use of IDEA and LSTA funds (overruling any existing rules to the contrary), and makes no statement on whether other federal funds can be used.

I think filtering should be considered like any other service when it comes to E-Rate eligibility.  Which means it comes down to: are filters necessary to deliver broadband to classrooms and public areas of libraries?  My answer: "yes."  Or more precisely: "It's necessary if the applicant decides it is."  Almost all schools filter, because they know that the Internet has lots of content that is not conducive to education.  Lots of (most?) libraries, on the other hand, don't filter adult access, because they don't want to be in the position of censoring access.  (Unfiltered libraries can't get E-Rate funding for Internet access and Category 2, of course.)  I'd be interested to know what percentage of libraries allow young children to have unfiltered Internet access.

The other test I often think of is: "Do organizations which do not get E-Rate funding use the service?"  The answer is yes.  Well, at least it is here at On-Tech.  I make sure all our Internet access is filtered, just so we don't stumble on something unsavory.  It also protects us from malicious sites.

Let's add filtering to the ESL.

Talkin' EPC blues

I hear lots of discussion on C2 budgets and the merits (or demerits) of big consortia, but I haven't heard anyone discussing the change that affects me every day: the new EPC color scheme.

You noticed, right?  At first, I thought I'd messed with my screen brightness, but I confirmed that I wasn't the only one seeing it: the color on the EPC navigation bar at the top of the screen has changed.  For the old-school HTML geeks, it looks like it's gone from around #003366 to #0033CC.  Around here, it all looked purplier, but in fact, it's just bluer.

I don't like it.  It's too bright, and somehow the green made the page look more grown-up.  The new color is somehow cartoonish.  Yes, it's closer to the dark blue in the "paper flying at you" USAC logo, but I think the page looked better with more separation between those colors.

They also changed the text in the ... what shall we call it? ... navblob of links in the upper right corner below the navbar, and in other places.  The color is too bright for text.

Another minus: in the old color scheme, whatever was selected in the navbar had white text with a yellow underline.  Now the underline is white.  This doesn't make so big a difference, but I think the extra color was usefully eye-catching.

I can't really add this to the pile of reasons for scrapping EPC, but EPC is just a tiny bit worse now.

PIA's newest employee

Check out who is now doing PIA reviews: Commissioner O'Rielly!

This week, he sent a letter to the Superintendent of one the the consortia that he has been accusing of wasting money by overbuilding.

It's basically a special cost-effectiveness review (CER).  CERs from USAC are arbitrary and mysterious enough, but now we have an FCC commissioner dreaming up more requests. We've always been dealing with secret cost-effectiveness standards, but now we have a Commissioner creating his own standards after the application's in review.

Hey, here's an idea: before we start with multi-directional CERs, the Commission should first decide if CERs are allowable.  There are a large number of appeals of CER denials that have been awaiting FCC decision since 2008. Here's my dream: that in deciding those appeals,  the Commission sets clear standards for cost-effectiveness, which are then published every year in the Eligible Services List.

I've said more than once that I don't think that the FCC should be encouraging consortia, but it seems unfair and capricious for the Commission to be encouraging consortia consistently for 20 years, and then suddenly requiring an applicant to justify creation of a consortium and justify its members.  First, the Commission should clearly disavow paragraph 476 of the Universal Service Order: "we should encourage schools and libraries to aggregate their demand with others to create a consortium with sufficient demand to attract competitors and thereby negotiate lower rates or at least secure efficiencies, particularly in lower density regions."  For 20 years, the FCC has been saying "bigger is better," and now Commissioner O'Rielly is asking an applicant to explain why bigger is better.

Mystery extension

Huh?  I was just reading the cover letter from one of the Commission's "Streamlined Resolution of Requests Related to Actions by [USAC]" and I noticed this sentence: "If the Bureau has dismissed or denied your appeal and you would like to seek reconsideration of that decision, the deadline to file a petition for reconsideration or application for review by the full Commission is 116 days from the release date."  What?! 116 days?  We were told it was 30 days. The FCC has denied a Request for Reconsideration that was filed 32 days after the decision.

Did the rules change?  What are the rules?  Well the above-mentioned cover letter provides the relevant chapter.  Here we go, 47 CFR § 1.106 (f): "The petition for reconsideration and any supplement thereto shall be filed within 30 days...."  So there, 30 days. 

Can anyone tell me where the 116 days comes from?  That's a really odd number.

Not that I'm complaining.

Let's hear from an overbuilder

In a new twist on the overbuilding debate, an Alaskan telecom provider has filed with the FCC asking for changes to E-Rate and Rural Healthcare rules, because they're finding it difficult to compete under the current rules.  The telecom costs in Alaska are thrilling, so I thought I'd see what's up.

This request is kind of the flipside of the Texas Carriers case: this time, the overbuilder is complaining that the owner of existing fiber has an unfair advantage.

Before I get into the particulars, here's an overbuilding success story from an article written the last time Quintillion tried to get the FCC to put the squeeze on GCI:

Crawford cited the Nome School District as an example. The district has five schools, and 700 students, and paid $305,000 per month to GCI for its internet service.

According to Crawford’s letter, the district was able to reduce its bill to $95,000 a month once Quintillion connected to the shore from its subsea fiber optic cable.

A little overbuilding, and the price drops by 69%.  If Commissioner O'Rielly's rules had been enacted before Quintillion laid cable in 2016, then Quintillion would have had to use GCI's infrastructure, and the Nome schools would be paying 3 times as much.  At a cost to the E-Rate of $3 million per year.


Who are Quintillion and GCI?

Quintillion, the complainant: a company that has laid oceanic fiber around the northwest corner of Alaska as part of a plan to build a link from London to Tokyo.  )Seems crazy until you see the map:

OK, it still seems crazy.  I believe the idea is to shave 24 ms off the current 170 ms latency between London and Tokyo; high-speed traders will pay a lot to give their trades that speed boost.)
Here's a map that just shows Quintillion's Alaska network:

GCI: a company that has created a fiber-microwave WAN that covers much of Alaska:

So Quintillion complains:

1. GCI gets more than 75% of USF funding awarded in Alaska.
2. The FCC cut GCI's Rural Healthcare (RHC) funding by 26% in 2017.
3. Roughly 50% of funded E-Rate Internet commitments in Alaska received only one bid.
4. GCI’s market dominance resulted, in part, from ... $44 million federal BIP [Broadband Innovations Program] grants.
5. GCI insists on using its own network, refusing to use Quintillion's.

To which I say:

1. That is troubling.  Unless, like Commissioner O'Rielly, you believe that since federal funding helped pay for GCI's network, it should be protected from competition.  Me?  I say: "Overbuild, Quintillion, overbuild!"  The consensus up in Alaska is that a monopoly is not a good thing.
2. I'm too lazy to look into that, but I'll bet that has something to do with RHC rules about the cost of services in rural areas compared to costs in urban areas.  And, of course, it's a result of GCI having infrastructure where no one else does.
3. That is troubling.  Some might say it is a good sign, that there is no wasteful overbuilding, but me, I think it shows a disturbing lack of competition.
4. And therefore, according to Commissioner O'Rielly's reasoning, the government's $44 million investment should be protected from any competitor building service to any locations covered by their network.
5. GCI's cost to use their own existing network is close to $0.  Quintillion, did you offer to let them use your network for close to $0?  Keep lowering your price, and eventually they'll stop refusing.

And what solutions does Quintillion propose?

1. Make changes to the RHC:
1. Consider more cost-effective middle-mile and backhaul solutions.
2. Extend the bid period to 90 days.
3. If only one bid is received, limit the contract length to one year.
4. Allow more flexibility on changing service providers for single-bid awards.
5. Audit single-bid awards.
2. Make changes to the E-Rate:
1. Extend the bid period to 90 days from 28 days.
2. Require single-bid awards to submit cost and rate information that will be made public.
3. If only one bid is received, limit the contract length to one year.
4. Audit single-bid awards.  

To which I say:

1. Not my circus, not my monkeys. 
2. OK, this is my circus ("my circus" meaning "I belong to this circus," not "this circus belongs to me"):
1. No.  What will service providers be doing for 90 days?  How many more bids will come in?  I agree with letting service providers have more time in some cases, but not 90 days in all cases; let local officials determine the appropriate amount of time.
2. That info is on the Form 471, which is public.  And GCI has already made their rates public.  And we're talking about public bids here: file a FOIA request and get the whole bid if you want.  That's 3 ways you already have to get the information for all bids, not just single-bids.
3. Really?!  You're going to make schools and libraries go through the formality of re-applying and getting a single bid year after year?  In most Internet contracts I've seen, the price drops sharply if you sign up for at least 3 years.  So schools and libraries have to pay more and go through more hassle, just because one of these years, some other company might want to bother bidding?
4. How about this?  In single-bid situations, we audit all the telecom companies in the state who didn't bid?  Why go after the applicant and the service provider who participated in the competitive bidding process?  Instead, let's investigate service providers who didn't, especially any that have gotten any federal funding.

Why did Quintillion make this filing?  Quintillion is a wholesaler.  They sell middle-mile to service providers.  They brought a fiber connection to five towns in Alaska, but sell only to other telcos, who then sell to consumers (including school districts).  Why are they complaining?  Have they ever participated in a bid?

There are only 3 school districts that Quintillion fiber would serve: Nome, Northwest Arctic Borough (Kotzebue) and North Slope (Port Hope to Prudhoe Bay).  Quintillion already won Nome, but let's see:  Northwest Arctic Borough is in a $6-million-per-year contract with GCI until 2021 (with voluntary extensions through 2023); North Slope is in a $7-million-per-year contract until 2021 (with voluntary extensions through 2031).  OK, I can see why Quintillion wants to give their resellers an opportunity to figure out how they're going to connect the schools to Quintillion's POP in those towns.  But hey, if the resellers start planning now, they won't need 90 days after the Form 470 goes up.  Then in the fall of 2020, let the districts know how much money you can save them, and they'll bail on the contract extensions and you'll win the business for FY 2021-2022.


So what do you think?  Is Quintillion an evil overbuilder, hurting the value of the federal government's investment in GCI's network?  Or are they a competitor prevented from bringing costs down for schools? (And, since the E-Rate is paying 80-90% of the cost, bringing down costs for the federal government.)

Mea culpa

I owe the E-Rate community an apology.  I was reading through an August 2014 post of this blog, and found that I had suggested the following:

You know what we should do for fiber instead of getting into the weeds on which pieces of fiber are eligible and which aren't depending on whether its lit, dark or IRU?  Say this: "Any applicant seeking a dark fiber lease must also request and consider lit fiber proposals."

Did I create the heinous mess of Form 470 drop-downs and evaluation requirements for dark fiber?

Maybe I should watch my mouth.  Yeah, maybe I'll release an NPRM and consider a new rule for not spouting suggestions before considering the evil rules that they could spawn.

Schools should subsidize rural broadband?

As promised, I'm going to take a look at Commissioner O'Rielly's comments about overbuilding from his speech to the Hudson Institute.

First, kudos on "pernicious consequences."  That is just a delightful phrase.

While we're side-tracked onto my preoccupation with language, in the official transcript of the speech, the Commissioner capitalizes the "R" in "E-Rate."  Bravo!

Back to the pernicious overbuilding.  I've already given my views on overbuilding, but let me take a look at the Commissioner's statements in this speech.

OK, first off, in my-speak (as opposed to "Orwellian-speak"), allowing service from someone other than the incumbent provider doesn't just "promote 'greater competition'"; it "allows competition."  Allowing bids from service providers who do not have existing fiber does not "enable artificial competition"; it creates a level playing field where existing providers must compete for business, instead of being given a monopoly.

Here are the Commissioners objections to allowing competition:

1. it does not help consumers
2. it does not promote long-term competition
3. it undermines private incentives to invest in and upgrade broadband networks
4. it distorts competitive outcomes
5. it makes it more expensive to connect Americans living in the most remote areas

 To which I say:

1. It helps the schools and libraries who are able to get service at a lower cost.
2. So having two providers with fiber in an area does not promote long-term competition?  Restricting fiber to a single provider is somehow better for competition?  I don't think so.
3. What incentive does a monopoly have to invest in and upgrade networks?  Meanwhile, a new service provider will have to invest more than an existing provider, so in the big picture, we get more investment when we don't protect the existing provider.
4. It doesn't "distort" competitive outcomes, it "allows" competitive outcomes.  You can't have a competitive outcome if you restrict the ability of competitors to enter the market.
5. Connecting private individuals is not the goal or the responsibility of the E-Rate.  The High Cost program needs to take care of that.

"Due to a loophole in the E-Rate rules, school district consortia had manipulated the competitive bidding process to ensure that funding went to build new wide area networks covering entire school regions...."  I have long been saying that consortia do not necessarily lower costs, but calling consortia a "loophole" is ridiculous.  The original FCC Order implementing the Universal Service provisions of the Telecommunication Act of 1996 says, "we should encourage schools and libraries to aggregate their demand with others to create a consortium with sufficient demand to attract competitors and thereby negotiate lower rates or at least secure efficiencies, particularly in lower density regions." (paragraph 476). More recently, the FCC took steps to favor consortia in the Seventh Report and Order (paragraphs 168-182)

"Given the large geographic scope of the projects and the short window to respond with a bid,small rate-of-return carriers didn’t stand a chance."  Actually, we'll never know if they stood a chance, because they chose not to bid.  They could have banded together and produced a bid.  Or they could have bid on part of the network (which was allowed under the RFP).

"any dollar that a rate-of-return provider loses to an overbuilder will inevitably be recouped from the High Cost program."  Is that how the High Cost program works?  It guarantees revenue?  Is that program under cap?

I've spent a little time trying to understand the rules for rate-of-return carriers, but the resources go from overly simple ("The Rate-of-Return Reform Order released by the FCC at the end of March 2016 aims to bring broadband to the parts of rural America that still lack access.") to opaquely jargon-filled ("Q: If a rate-of-return carrier currently has no broadband-only lines and elects ACAM model-based support, must it refile its Special Access tariff to move the relevant costs into the new service category?  A: Yes, carriers are required to move these costs from the Special Access service category to the new Consumer Broadband-Only Loop category. Rate-of-return carriers then have the option of tariffing a consumer broadband-only loop charge for this service.")

In any case, which fund should support incumbent carriers that cannot compete with competitive carriers?  Seems to me that's the job of the High Cost fund, not the E-Rate. 

So it's possible that an applicant selecting a lower-cost offering from a competitive carrier might force  the High Cost program to pay the (more expensive) incumbent carrier more.  Will the savings to the E-Rate be greater than the cost to the High Cost program?  I'm confident no one can calculate that. 

But in any case, it seems absurd to force schools and libraries to subsidize carriers.  That would be the result if the FCC created rules to protect incumbent carriers' monopolies by forcing E-Rate applicants to use existing networks.

Doff that cap

As promised, here are my thoughts on Commissioner O'Rielly's recent statements concerning the need for an overall cap on the USF.  I've already blogged about budget caps, but I thought I'd look at the reasons the Commissioner gave in his speech for needing a cap.

The Commissioner gives 4 reasons we need a cap:

1. "to protect the investments of ratepayers who pay for our programs ... especially given the regressive nature of USF fees and their disproportionate burden on lower- and middle-income Americans.... In fact, the lowest-income 10% of households pay 12 times more than the highest-income 10% as a percentage of their income."
2. "force the FCC to consider the whole USF when increasing program spending."
3. "an FCC running up against a cap would have greater incentive to eliminate inefficiencies
   that detract from achieving the program’s mission and value."
4. "a budget would help protect universal service.  ...this NPRM provides plenty for all."

On the first point:
The Commission is already doing a dandy job of protecting ratepayers.  (See the last graph in yesterday's post: the actual fee paid by consumers has been pretty steady for the last 8 years.)

As for the fee being regressive, I have a hard time believing that "the fee is generally spread among consumers on an equal and agnostic basis."  The Contribution Factor (CF) is spread on an equal and agnostic basis, but consumption is not, and the fee is the product of CF and consumer expenditures.  Let's take a look at the data from the Bureau of Labor Statistics, which does an annual survey of consumer expenditures.  I couldn't find exactly the table I needed, but let's look at a table that details 2017 consumer expenditures by quintile.  I pulled out the pertinent data and put it into a smaller table:

	Low 20%	High 20%	Multiple
Income after taxes	$11,933	$149,504	12.53
Telephone services	$706	$2,036	2.88
% of income	5.92%	1.36%	4.34

That still shows that the fee is regressive, but not as extreme as the Commissioner would like it to be.

How could we make the fee less regressive?  Well, we could seek to aggressively expand the Lifeline program, enrolling some of the 72% of eligible people that don't take advantage of the program, and doubling the amount that each recipient gets from $9.25 to $18.50.  (I know, still not enough to cover the cost of a phone line or an Internet connection, but still, a step in the right direction.)

On the second point:
Why should the voracious appetite of the High Cost Fund mean that America's school children get less?  The overall cap just gives weak-willed commissioners an out: "Well, we don't want to cut any of the programs, but we need to stay within our means, and ____ is crucial to the future of America, so we're forced to cut ____."

On the third point:
What?!  The Commission isn't doing all it can to eliminate inefficiencies?  How would a cap provide greater incentive?  As the Commissioner makes clear, if the cap got uncomfortable, the Commission could simply raise it.

On the fourth point:
If the goal of the NPRM is *not* to provide plenty for all.  It is to restrain all.  This is the worst kind of "budget-cutting"; the current Commissioners can take credit now, and all the pain will be felt by future Commissioners.  If budget caps do not limit expenditures, then they are just window dressing.

I remain unconvinced that we need a cap.

The Commish feels our burden

Commissioner O'Rielly recently gave a speech about Universal Service at the Hudson Institute, and the topics were quite familiar: the contribution factor is too high, we need an overall cap on the Universal Service Fund (USF) budget, and we need to stop overbuilding.  To which I say not really, no and hell no.

This post will just look at the overall burden on ratepayers.

No question, the Contribution Factor keeps going up, but that is not necessarily bad for consumers.  (For those who don't know, the USF is funded by a fee charged to carriers, set as a percentage of interstate revenues; carriers then pass that fee through to customers.)  Here's a graph of the Contribution Factor (CF) over time:


All other things being equal, that graph looks bad for consumers: the CF has more than quadrupled.  But all other things are not equal.  Consumers do not pay the CF; the fee that carriers charge them is the CF times the interstate charges on their bill.  Here is a the Revenue Base, the total of all eligible charges:

What consumers end up paying to carriers, and the carriers pay into the USF, is the CF times the Revenue Base.  Here's how the product of those 2 numbers has varied over the years:

Still not great, but basically, it doubled by 2011, and has been bouncing around the same level for the last 8 years or so.  So when the Commissioner says we need to protect consumers, I say that the Commission is already doing a good job at protecting consumers.  We've been paying about the same amount for the last 8 years.

I'm going to create separate blog posts about the cap and overbuilding.

But what about me?

Yesterday's post look at the question, "Why is the contribution factor so high?"

Today's question: "What will it do to my phone bill?"

I pay 3 phone bills, one for my business, one for my home, and one for cell phones.  The office is my cable company, home is my ILEC (Incumbent Local Exchange Carrier, aka "Baby Bell," aka "the local phone company").

How much does the USF cost me?  On my business bill, it's 2.29% of the voice portion of my bill. On my home bill, 2.75%.  Cell phones, 3.27% of the line charge.  So how much the current jump in the Contribution Factor from 18.8%  to 24.4% actually make those bills increase?

Office: 0.68%
Home: 0.82%
Cell phone*: 0.97%

Mind you, the percent increase on the total bill will be much smaller; those percent increases are only on the portion that's affected by the USF (voice service on landlines, line charges on my cell phone bill).  Most of my bill (charges for Internet/data, equipment, etc.) is not affected by changes in the USF.

So while the Contribution Factor is jumping almost 30%, consumers will see their bills go up less than 1%.  Because the vast majority of what you buy from phone companies is not considered interstate, and so not subject to USF fees.


*The grammar curmudgeon in me does not like the inclusion of "phone" in the last item, but not the previous two.  Originally, I had just "Cell" instead of "Cell phone," but I thought that looked too much like I was talking about phone service to my jail cell.

Let's be more demanding

Well, that's not good.

The USF Contribution Factor is going up.  Way up.  To a record-setting level.  That's not good for the E-Rate.  Because some of the Commissioners will cast this as a tax increase due to unrestrained spending, and it's going to encourage them to inflict all sorts of caps on Universal Service.

Is it a tax increase?  Technically, no.  The GAO and CBO have both complained that it isn't a tax.  But really, if the government makes you give up some of your money, and the government decides how that money is spent...well...sorry, but that's not a "contribution."

Is it due to unrestrained spending?  Let's look at the numbers.  Wait, I can't find a table of USF contribution calculations over the years?  Hang on, I'll build one.  At least the FCC has a page of the Contribution Factor orders going back to 2000.  Here's my compilation.

But I like my data in pictures, so here are two simple graphs that explain why the contribution factor keeps going up.  First, look at the total revenue from which the USF is drawn (revenue in billions):


Next, look at the how much money the USF programs need (demand in millions):

So clearly, we're looking for a lot more money from a much smaller pool.

But let's take a closer look at the components of that increase in demand:

Let's unstack that graph, so you can look at the growth and relative demand for each program:

In 2000, the E-Rate and High Cost were the big boys in the fund, but while the High Cost fund has more than doubled, the E-Rate bumped along at about the same demand, losing ground recently.  Meanwhile, Low Income spiked around 2012, but has dropped recently, and while Rural Healthcare has grown the most in terms of percentage, it's still the smallest program.

I can't resist playing with the graphics, so I'm going to pull out each program, adjust the scale to fit that program, and add a trendline.  This will show us which programs have been growing fastest.





Seems pretty clear which program is not to blame for the increase in demand.

Straying from my lane

I should know better than to take a look outside the E-Rate, but I can't help it; I'm a curious fellow.  So when the announcement of the latest Connect America Fund (CAF) grants came out, I looked to see which states they went to.  What?! New Jersey?!  What's the goal of the CAF?  "to accelerate broadband build-out to ... Americans ... who lack access to infrastructure capable of providing 10/1 Mbps fixed broadband."  OK, maybe in southern NJ, or the northwest corner.  Wait, there are three grants in Monmouth County.  This county is thoroughly blanketed by broadband from Verizon FiOS and a cable company.  Who can't get 10 Mbps?

Let's look at this grant: Block 1017, Block Group 1, Census Tract 8038 (in the FCC data file, it's Census Block ID 340258038001017). That block contains parts of 2 riverfront properties in one of the richest towns in the state: the properties are each assessed around $6.9 million.  The USF is paying Verizon to run fiber to 2 homes worth $7 million each?  The award list says that Verizon is only getting $2,577.70 from CAF, but still.... 

Verizon says those properties can already get 200 Mbps of Internet for $40/month.  Comcast offers 150 Mbps for $40/month.

Exactly what is Verizon getting $2,577.70 for?

I have got to stop peeking at the other USF programs, because it just gets my dander up.

Wireline Not-Too-Much Competition Bureau

Yesterday's blog post had me reading Alenco v. FCC, where I came across this statement: "The FCC must see to it that both universal service and local competition are realized; one cannot be sacrificed in favor of the other."  And that got me thinking about overbuilding and competition.

The whole idea of controlling overbuilding is antithetical to the Telecommunications Act of 1996, which is the act that created the E-Rate.  The first words of that act: "An Act To promote competition and reduce regulation...."  The FCC's page on the Act says, "The goal of this new law is to let anyone enter any communications business -- to let any communications business compete in any market against any other."  [Side snark: "new law"?! Maybe it's time to refresh that page.]

That's the reason that the E-Rate is overseen by the FCC's Wireline Competition Bureau (WCB).  Congress realized that to provide a level playing field, the existing Universal Service rules were going to have to be rewritten, and while they were rewriting the Universal Service rules, they created 2 new programs: the E-Rate and Rural Healthcare.

The recent Petition for Rulemaking on overbuilding stands the whole competitiveness debate on its head.  When the Telecommunications Act was past, the goal was to force the ILECs (Incumbent Local Exchange Carriers, the Regional Bell Operating Companies (RBOCs) spun off from AT&T in 1984) to allow competitors to use their facilities.  In this case, the petitioners want to force competitors to use their facilities.  So the rules written then don't apply all that well to this situation.  When the Telecommunications Act was written, no one foresaw that overbuilding might one day be an option.

But it just seems very wrong to use the E-Rate to inhibit competition.  It seems wrong to use this program, created by the Telecommunications Act, to reduce competition by increasing regulation.


On a complete tangent, how did the 1984 breakup of the AT&T monopoly work out?  Not so good.

Universal ≠ capped

As expected, the FCC has released a proposed rule to put a cap on the USF as a whole (currently, each programs has its own cap).  I've already opined on the overall cap, but I'll give one more overall argument against the proposal, then dive into the NPRM.

Let's take a step back.  Why should an increase in demand for broadband to schools reduce the funding available to bring broadband to rural communities?  Why should the spending in one program have anything to do with the rest?  As things stand, if one of the programs hits its cap, and the Commission has 2 options:

1. Enforce the cap for that program.
2. Increase the cap for that program and increase the Contribution Factor.

Under the new rules, if demand in one of the programs exceeds the cap for that program, then the FCC has three choices:

1. Enforce the cap for that program.
2. Increase the cap for that program, increase the overall cap for the USF, and increase the Contribution Factor.
3. Increase the cap for that program, don't increase the overall cap for the USF, and start cutting other programs.

The only result of these rules is to create option 3.  And option 3 sucks.  The overall cap allows the FCC to cut the E-Rate by saying something like, "While we acknowledge the educational value of increasing broadband access for students, 99% of schools are already connected, so the real digital divide is at home, so we are prioritizing the Lifeline program."  They will be able to create a false choice between options 1 and 3, leaving option 2 behind the curtain.

Who likes this proposal?  Former U.S. Representative Joe "Bleed It Dry" Barton.  Rep. Barton has left the House, but an overall cap could achieve his goal "to so underfund [the E-Rate] that it goes away."  

OK, let's take a look at the report.  As usual, I'll just be picking out things that strike my fancy and offering my ill-considered commentary.

"as courts and the Commission have recognized, too much subsidization could negatively affect the affordability of telecommunications services for those consumers who ultimately provide the support for universal service."  OK, I'll bite.  I'm not a lawyer, but I'll look up the cases and see what they say.  OK, Alenco v FCC (2000) does say, "Because universal service is funded by a general pool subsidized by all telecommunications providers and thus indirectly by the customers excess subsidization in some cases may detract from universal service by causing rates unnecessarily to rise, thereby pricing some consumers out of the market." But Qwest v FCC (2001) says that assertion is arguable, and notes that the FCC has not made it a principle of the program to limit the burden on ratepayers.  Let's study this to see if subsidization actually would hurt affordability for anyone.

" we seek to promote a robust debate on the relative effectiveness of the programs."  Why?  What does it matter if the Lifeline (née Low Income) program is more effective than the Connect America Fund (CAF, née High Cost Program)?  If they're both incredibly effective, why does it matter if one is more effective than the other?  And how are you going to compare the effectiveness of two programs that have different goals?

Oh, look at the table on page 5.  The CAF/High Cost is already over cap.  So there you go: the CAF will immediately start eating into the other programs, only we won't notice it right away, because the other programs have unused cap space.  The boiling frog fable comes to mind.

"we also seek comment on the appropriate way to reduce expenditures automatically."  There it is: we want to cut your funding without actually having to vote to cut your funding.  It's not us cutting your funding, it's "the legal imperative to remain within the cap."  Please pay no attention to the fact that we created that "legal imperative" in order to create exactly this situation, and we could remove it.

"We also seek comment on extending our projections out further than one year to better anticipate potential spending over the cap. ...the Commission would have a better opportunity to coursecorrect if it can evaluate demand over a more extended period of time."  Wait, so you're saying that if USAC projects that we might hit the cap in 3 years, you're going to start to restrict funding now?  Yeah, no.

"should we prioritize based on the cost-effectiveness of each program or the estimated improper payment rates?"  What does "cost-effectiveness" mean?  Here are the improper payment rates from page 81 of the FCC's 2018 financial report:

CAF/High Cost	0.03%
E-Rate	2.59%
Lifeline	18.47%

So when the CAF busts the cap, Lifeline (and to a lesser extent the E-Rate) would take the pounding.  (It appears that 2 IPIA audits were conducted on the Rural Healthcare program, and no improper payments were found.)

"Should we instead consider reducing each program’s disbursements by the same amount...?"  The same dollar amount?  Because a reduction of $582,000,000/program would mean a 13% decrease in the CAF, but would completely obliterate Rural Healthcare.

" unexpected increases in demand in one program could affect the funding levels of other programs that have not experienced similar unexpected increases in demand."  C'mon, the purpose of the overall cap is to have demand increases in one program affect the funding of the other programs.  If you don't want that to happen, don't create an overall cap.

"would self-enforcing caps on each of the programs provide more predictability to universal service spending?"  Yup.  It's hard enough trying to read the tea leaves to determine demand within the E-Rate program.  Having to guess what will happen in the other programs would make life much more unpredictable for E-Rate participants.

"Are there ways to compare effectiveness across the programs more holistically in order to measure program efficiency?"  There are many ways, all of them flawed.  Let's use penetration rates among residential, business, and community anchor institution locations potentially served by the program.  I've mentioned that the E-Rate participation rates are dropping, but the other programs are worse. I've mentioned that Lifeline only serves 28% of those eligible, and I'll bet the CAF has very low penetration rates among potential residential customers.  Side bonus: focusing on penetration would encourage the FCC to remove the barriers that are driving away E-Rate applicants.

"We also seek comment on combining the E-Rate and RHC program caps."  Um, no.  The caps should only be combined if the programs are combined.  Why should those 2 programs have to fight over the scraps left over after CAF busts the cap and the pain gets split between Lifeline and the E-Rate/RHC?  Another boiling frog budget cut.

"In other USF proceedings, some stakeholders have asked the Commission to reexamine the rules to better harmonize the USF program rules."  So instead of harmonizing the rules, you're going to combine budget caps?  No one asked for that.

"It is reasonable, therefore, to consider combining the caps to create additional implementation efficiencies and flexibility."  No, it isn't.

On to the Commissioners statements.
Commissioner O'Rielly:
"Since the fee is generally spread among consumers on an equal and agnostic basis, low-income households pay a far greater share of their income to the USF than their high-income counterparts."  Can I get a source?  It certainly could be true, but I'm not aware of any study on the relative telecom spending of low-income and high-income families.  If it is true, then someone at the FCC should look into why the Lifeline program is so ineffective....

"This NPRM initiates a dialogue...."  Who will take place in that dialog?  When is it my turn to discuss ideas with the Commission?  In my experience, an NPRM does not promote dialog.  The Commission has said it is considering some rules, stakeholders have 30 days to write comments (with another 60 days for reply comments), and then the Commission makes a rule.  If you want to start a dialog, post a Request for Comment before posting an NPRM.  An NPRM is the last step in the process before publishing an order.

"This NPRM’s proposed budget would NOT cut funding to Universal Service."  If it never limits USF funding, then it serves no purpose.  It makes no current cuts, just sets arbitrary limits on future growth.

"Certain special interest groups have claimed—incorrectly—that establishing an overall budget is a roundabout way to cut funding to the Lifeline program for low-income Americans." Guilty as charged.  Does that make me a "special interest group"?  I'm coming up in the world.  Who else is saying this?  Am I single-handedly "certain special interest groups"?

Commissioners Rosenworcel: "I do not support an approach that fosters the universal service hunger games."  Wait, would we get to meet JLaw at USAC trainings?

Commissioner Starks: "...the FCC should be focused on mapping not capping."  The Dems sure went for the sound bites, didn't they?

Me, I say the FCC should be focused on the "universal" part of Universal Service, by taking steps to increase participation.  Growing, not capping.

Pro SECA

SECA (the State E-rate Coordinators’ Alliance) has submitted a list of proposed changes to the Eligible Services List (ESL) to the FCC.  Let's see what they're proposing:

1. Make content filtering eligible
2. Make more data security functions (anti-virus, anti-intrustion) eligible
3. Allow applicants to choose multiple vendors to provide the same service to the same building
4. Cabling should be eligible, regardless of what's plugged into it
5. Make break/fix and time/materials maintenance contracts ineligible
6. Fund multi-year support contracts in the funding year they're paid, not pro-rated across the length of the contract.
7. Eliminate sub-categories (I think they mean getting rid of the Basic Maintenance category)
8. Continue MIBS ("Managed Internet Broadband Service"; paying a company to provide equipment, installation, management, repair of an applicant network)
9. Two suggestions
• Bring back the Glossary of Terms
• Include a CIPA (Children's Internet Protection Act) compliance reminder
10. Allow Wi-Fi on buses (and other off-campus Internet solutions)

To which I say:

1. I've been saying this since 2007.  It made it into an NPRM in 2008, but withered on the vine.
2. See #1.  The most important reason: it's increasingly difficult to find firewalls that aren't called "total security appliances" and don't include all this stuff.  Let's not burn applicants who don't have the tech savvy to match manufacturer jargon with USAC jargon to figure out which features are eligible.
3. Yes!  Buying connections from 2 different vendors is a cost-effective means to increase network availability.  "Redundant" is not a dirty word in IT; it's a virtue.  The GSA (the US gov't organization responsible for purchasing) has made it a requirement of Internet contracts since 2008 (if not earlier).  The GSA requires that even government agency backup sites for disaster recovery have "redundant access to the GSA data network."  Check out page 24 of the GSA's ordering guide for data services: it explains what to do if "[t]he agency wants to use one solicitation to select multiple contractors for the same requirements: such as for a primary and backup, or for network redundancy/diversity."
4. I was going to get my hackles up a little, but the $150-in-5 Rule makes me just say "fine."  I don't feel good about security cameras and phones being funded if they're riding on their own network (with their own switches, separate from the data network used by students).  But forcing applicants to cost-allocate their cable plant just seems like a huge waste of time since C2 budgets don't allow applicants to get all the eligible equipment they need, especially since most of those devices are just going to be plugged into the same switch as the WAPs.
5. Huh?  I'd be OK with dumping maintenance entirely, but why single out break/fix contracts?  I've always thought those contracts fit in better with the FCC's position of "we don't want to pay for warranties, just for services delivered."  And they definitely fit better with the E-Rate calendar, which forces applicants to start the year without maintenance funding approved.
6. Yes.  Just another area where enforcement saves no money, and creates headaches.
7. Agreed.  The only reason to have a separate Basic Maintenance was the 2-in-5 Rule.  Let's toss that distinction.
8. Again, with C2 budgets, go ahead and make it eligible.  My only complaint is that I can get E-Rate funding for someone else to manage my network, but I can't get funding for the products I need to manage my network.  Let's make network management software and appliances eligible.
9. Yes.  Shortening the ESL didn't simplify the rules, it just hid the rules.
• The Glossary of Terms was important, because when I read the ESL, I hear Inigo Montoya in my head: "You keep using that word. I do not think it means what you think it means."
• Let's take it a step further and tell applicants whether CIPA requires: 1) applicants to filter devices which are not applicant-owned if they are using the applicant network, and 2) applicants to filter applicant-owned devices if they are not on the applicant network.
10. I have heard of some great uses of Wi-Fi on buses.  Back when we were hitting the funding cap for the program, I didn't think it was a good use of funding, but we're awash in funding, so I'm OK with it.

So I agree with 9 out of 10.  As usual, SECA delivers wise suggestions.

And they got me thinking.  Several times they mentioned how the 470 drop-down menus should work, and it occurred to me: the ESL should just be an explanation of how to use the drop-downs on the 470 and 471.  Organize the whole thing that way.  It would serve 2 purpose:

1. It would increase the chances that 470s and 471s were done right, which is kind of the point of the ESL.
2. It might make the FCC realize how freakin' hard it is to make reality fit into the drop-downs.

Win-win.

Stop the madness

Now it's official.  The FCC is seeking comment on a Petition for Rulemaking from a trio of small phone companies who want to "discourage overbuilding of existing federally supported fiber networks."

I've already stated my objections to this harebrained attempt to preserve monopolies.  So I'll just say this: get your comments in.  Because I am sure that the companies who have received federal funding to install fiber are going to be vigorous in their support of this proposal to protect their monopolies.  And the fact that it took only 8 days for the FCC to put out this notice has me worried.; it feels like the FCC is rushing to get this out there.  Perhaps because Commissioner O'Rielly is obsessed with overbuilding.

Comments are due by  July 1, reply comments by July 16. 

Filing is not hard.

Just go to the Express Comment form, put in Proceeding RM-11841 (as you type in the text box, you'll see a list of proceedings; after you've typed "RM-1184", you can click on "RM-11841" on the list).  Then put in your name and address, and under "Brief Comments," type in what you think of the idea. 

It seems the FCC likes to hear how the rule would affect specific organizations, so if you can show how this rule would harm your school or library, that's very powerful.  In general, facts are powerful.

If you want to write your comments offline and then upload them, you can use this form.

Comments matter.

Overbuilding again?

Well, now it's moved past one Commissioner's complaints.  A trio of rural phone companies have filed a request for rule changes with the FCC, seeking to preventing overbuilding of existing fiber.

First, I'll say that they do have a point.  But their suggested rule changes are terrible.

Where do we agree?  "Because the regions include hundreds of schools and cover thousands of square miles, only select, large service providers have been able to respond to the RFPs. Smaller providers that are already serving individual schools within the region, via their USF-supported fiber networks, were unable to respond to the RFPs due to the sheer size of the requested WANs. "  Yup, that's a problem, and not unique to fiber; I have provided examples of statewide purchases excluding bidders.

I don't have a great solution to the "too big to get bids" problem.  I think the best solution is to get rid of consortia and use purchasing cooperatives; applicants combine their purchasing power, but contract individually with the selected service provider (which of course means filing their own Form 471).  So in this case, each district in the TX consortium would have to compare the consortium offering to other bids, including bids that only serve that applicant.  If there are reasons that a district would prefer to be connected to the consortium network, they can include that as an evaluation criterion.  But price has to be primary.

The problem I can't solve is that such a system is less attractive for bidders in two ways: 1) the most lucrative clients are more likely to find a better deal and not purchase through the cooperative, leaving the winning bidder to cope with the lower-quality clients; 2) if a client or two in the middle of the area drops out, it could blow a hole in the network design.

But that solution is much better than the change proposed by the trio of phone companies: "Category One services shall not include special construction costs for the construction of fiber where it has been demonstrated that fiber already exists, unless the existing fiber owner is unwilling to negotiate in good faith to lease that fiber at reasonable market-based prices."

How will USAC determine if fiber exists?  Thusly:

1. Anyone applying for Special Construction will have to have a "FCC Form 471 Special Construction Exhibit" which includes a list of locations and a map of the fiber route.  The Exhibit is posted publicly for 60 days
2. During that 60 days, anyone with fiber in the area "shall submit information to the Administrator to show that fiber already exists in the applicable locations."
3. If USAC decides there is existing fiber, the service provider on the 471 will have 120 days "to negotiate in good faith the terms, conditions and reasonable, market based price of a fiber lease agreement."

Reasons I dislike this solution, off the top of my head:

1. More forms and more review?  The application process and review process for self-provisioned fiber is already incredible onerous.
2. The process would not conclude until 180 days after the Form 471.  So the FCDL is delayed over 180 days (60 days + time for USAC to decide if fiber exists + 120 days to negotiate).  It's already a rush to get a big network lit by June 30, and this process would remove almost half the time available.
3. " fiber already exists in the applicable locations" is too vague.  If the map includes one pole that has someone else's fiber, are we going to put the application on hold for 180 days?  What if someone has fiber connecting some of a district's locations, but not others?  What if there is fiber running with a half mile of the locations?  Within a mile? Ten miles? 
4. Negotiate the "market based price"?  These 3 telecoms are trying to ensure that there is no market, by maintaining their monopoly on fiber in the area.  This whole situation arose because a new service provider can lay new cable more cheaply than the cost of leasing existing fiber.  Even when the existing fiber was installed with USF subsidies (from the High Cost program).  Because the existing fiber is at monopoly prices.
5. The new service provider won't know it's costs when it submits a bid, since the cost will be dependent on the results of negotiations, half a year after the 471 is submitted.
6. You think this won't end up in court?  Any time I hear "good faith," I think, "there's a lawsuit waiting to happen."
7. This solution assumes that only large projects will be affected.  What if the Baby Bell has fiber coming into a building, but the cable company, which has fiber on a nearby pole, will have to pay Special Construction to bring the fiber into the building?  Does the cable company have to negotiate for the existing fiber?
8. More fiber is better.  The E-Rate is not in the business of running fiber out to remote areas; that's the job of the High Cost program.  So the E-Rate should only pay for overbuilding in cases where it is cheaper.  That is currently the rule.  These new rules seek to increase the cost to the E-Rate program in order to protect a monopoly.

So I hope the FCC will not make the changes suggested.  Instead, maybe they should just stop pushing consortia.

Subsidizing monopolies

All the FCC Commissioners testified before Congress yesterday.  No, I didn't listen to it.  But I am scanning their statements to see if there's anything important.

First, of course, the most important question: Did they capitalize the "R" in "E-Rate"?  Well, it turns out only Commissioner O'Rielly used the word.  He did capitalize!

So what did they say about the E-Rate?  Not much obviously.  Is that a bad thing?  Part of me just wants Congress to forget all about our little program.

Chairman Pai:  While the Chairman did talk about the Universal Service Fund, and said the digital divide was a top priority, he focused on on the Connect America Fund and mentioned the Rural Health Care Program.  The only statement I found that concerns the E-Rate:  "...we developed a reorganization plan to create a Fraud Division within the Enforcement Bureau...to combat USF fraud...."  Good.  Stay focused on fraud.  Because most improper payments are the result on unwitting applicants getting snared by the huge, secret, nebulous and ever-shifting rules of this program, and don't benefit anyone personally.  Better to focus on people intentionally taking improper payments for self-enrichment.

Commissioner O'Rielly: Anybody want to guess?  Yup, overbuilding.  This time, he takes his complaint further: "providers serving hard to reach areas can face serious financial difficulties if a new government-subsidized provider 'competes' to serve existing customers—or worse—takes only the most highly profitable customers.... It recently came to my attention that new E-Rate-subsidized fiber networks were overbuilding local USF-funded Texas broadband providers and stealing their core anchor customers. By manipulating the contracting process to favor the bids of particular providers or self-provisioned service, some local school districts have been actively undermining local USF-supported providers’ existing investments, and as a result, making it even more difficult to serve surrounding communities where some households may lack any Internet access at all."  Wow.  Let's unpack that.

" a new government-subsidized provider": Yes, the new provider benefits from the E-Rate subsidy, but the existing provider benefits from the E-Rate subsidy and the CAF subsidy.  So it's a government-subsidized provider winning a bid over a doubly-government-subsidized provider.

" 'competes' to serve existing customers": Yup, competes.  The Form 470 process does increase prices and reduce flexibility for applicants, but it can create competition.  And clearly this whining is coming from someone who lost a competition.

"takes only the most highly profitable customers": I think of this as Ma Bell's Lament.  My dad worked for Ma Bell, and when they lost their monopoly, he said that since competitors would skim the profitable business (long distance and business local), Ma Bell would have to raise rates on residential local service.  He wasn't wrong, but....  Sucks when your monopoly gets taken away.

Wait a minute, though.  Take a step back.  "most highly profitable"?!  Shouldn't LCP (Lowest Corresponding Price) guarantee that school districts are the least profitable customers?  I know LCP isn't enforced, but should a Commissioner be admitting that to Congress?  And LCP aside, I object to the idea that the cost of bringing service to remote areas should be funded by overcharging school districts.  Why are you trying to make the E-Rate fund that service?  That's the job of the High Cost Fund.  And why aren't Connect America Fund projects required to serve surrounding communities?

"manipulating the contracting process to favor the bids of particular providers": If the Commissioner has evidence that an applicant's procurement has not been fair and open, he should Code 9 that applicant. [Whistleblower calls used to be called "Code 9" calls, because if you called in and said "Code 9," you could be anonymous.  Alas, the Client Service Bureau has no sense of tradition, so if you want to report a program violation today, you press 3.]  Except, you know what?  Self-provisioned fiber FRNs are essentially pre-Code-9ed; the procurement process is scrutinized more closely than it would be under a typical Selective Review or Audit.  If, on the other hand, the Commissioner only has a complaint by a telecom company with no evidence of malfeasance, he should not say such things to Congress.

"favor the bids of ... self-provisioned service": Has the Commissioner seen what applicants have to go through to get approval for self-provisioned service?  The system is set up to favor lit fiber over leased dark fiber, which is favored over self-provisioned.  And why would an applicant want to favor self-provisioned?  E-Rate unpleasantness aside, self-provisioning projects are a tremendous pain in the filament.  The only reason to go through the hassle of laying your own fiber is to save money.

"some local school districts have been actively undermining local USF-supported providers’ existing investments":  Does the Commissioner have evidence that districts are trying to undermine someone's investment?  What possible motivation could they have for actively undermining a telecom company?  I'll grant that the provider with existing fiber may have been counting on charging a lot of money to the school district, but the district is not seeking out lower prices because it wants to undermine anyone.

"making it even more difficult to serve surrounding communities where some households may lack any Internet access at all": So taking away one customer makes it more difficult to serve other customers?  Hmm.

Perhaps the Commissioner is right and an unscrupulous school district (or, based on the questions in his letter to USAC on the subject, more likely a consortium of districts) has colluded with a service provider to fix a procurement and wastefully install more fiber on poles where fiber already exists.  If that's true, the Commissioner should give it to the local Attorney General, not complain to Congress about it.

Or perhaps a service provider got CAF funding to lay some fiber in a remote area, with a business plan based on monopoly pricing, and another company came in and undercut them.  Speaking as a small business owner, I completely agree that competition sucks, and it makes it much harder for me to bring E-Rate to all applicants.  Speaking as a taxpayer, though, I'm glad that no one has a monopoly on E-Rate consulting.  (OK, if I had a monopoly, I would be a beneficent overlord and the program would be much improved, but that's an exceptional case.)

Or perhaps the applicant consortium was larger than the footprint of the already-subsidized existing carrier's monopoly, which again messed with the business plan.  I have certainly pointed out in the past that large consortia can limit competition., and suggested that applicants "take a close look at whether that consortium is really going to save you money."

Whatever the case, it's not an issue for Congress.

And it doesn't strengthen the Commissioner's "humble request ... that Congress consider the FCC’s Universal Service Fund (USF) as a primary means to distribute new funding" in order to avoid "wasteful and duplicative spending and adverse consequences...."  I mean, even if his example were valid, he's basically saying: "We need to keep all the funding in the USF so that we don't see the kind of duplicative and wasteful spending that we're currently seeing in the USF."

But the Commissioner did get the most important thing right: the big "R" in "E-Rate."

再见, 华为

What does President Trump's Executive Order on Securing the Information and Communications Technology and Services Supply Chain have to do with the E-Rate, you might ask?  It will probably affect which vendors you can buy equipment from.

Not that the FCC needed an Executive Order to get on this.  Back in April, the Commission released a Notice of Proposed Rulemaking "to prohibit, going forward, the use of USF funds to purchase equipment or services from any communications equipment or service providers identified as posing a national security risk...."  The NPRM quickly focused on two vendors: Huawei and ZTE.  The FCC created Docket 18-89 for comments, and they keep coming in.

Meanwhile, the 2019 National Defense Authorization Act (skip to section 889, page 282) declared that no executive agency should purchase from Huawei Technologies Company, ZTE Corporation, Hytera Communications Corporation, Hangzhou Hikvision Digital Technology Company, or Dahua Technology Company.  And the Commission sought comment on whether that applied to purchases through the USF.

So one of these days, the FCC is likely to prohibit the use of equipment from those countries.  Does that matter?  Well, I couldn't find any instances of E-Rate applicants making any C2 purchases directly from Huawei  (SPIN 143036885) or ZTE (SPIN 143044152).  But some of the comments in the docket are from telecom companies using equipment from those vendors who are going to be facing some serious replacement costs.  So perhaps the cost of some C1 services will be creeping up.

Meanwhile, the tariffs on Chinese imports have already affected C2 pricing.  The September 10% tariffs increased prices from many C2 manufacturers, but I haven't read anything about the effect of the new jump to 25%, but it's got to have some effect.

Someone's head restin' on my knee

I happened across some suggested changes to the program over at Funds for Learning, and I can't resist running my mouth.  The suggestions:

1. Bring back voice
2. Make all network infrastructure eligible (security, monitoring and management are mentioned)
3. C2 budgets should be per-entity, not per-entity.  By which I mean, per-organization, not per-location.
4. C2 budgets should be doubled.
5. The C2 budget floor should be tripled.

To which I say:

1. Let's expand C2 first, and see if we've got money left.  Back when the program ran out of money every year, I think I was the first to suggest throwing voice out of the program.  Now that we don't hit the cap, I'm OK with letting voice back in.  But first, let's fully fund C2.
2. I agree that the per-student cap reduces the need to nit-pick nework equipment.  And all sorts of security equipment should be eligible in any case.  Monitoring and management are a little more questionable to me, but if we're going to pay for MIBS (the "M" is for "managed"), then it seems like management should be eligible, whether it's a service or a piece of equipment.  But what FFL said was, "There should be zero ineligible network infrastructure."  That's a bit too far: let's not let servers back in, or network storage (I'm looking at you, video servers).  But yes, let's allow security, management and monitoring.  It's irresponsible to run a large network without them.
3. Yes, yes, yes!  This should be the FCC's top E-Rate reform priority.  It's a simple change, and would dramatically simplify the C2 process.  And it would give school districts the power to decide where they need equipment, rather than having to live by the fiction that all locations have equal C2 needs.
4. Yes!  My back-of-the-napkin calculations say we should make the C2 cap at least $500/student, and the program could afford $600/student, but doubling would be a step in the right direction.
5. Yes.  Small applicants are leaving this program in droves, so the FCC should do whatever it can to bring them back.

What is the FCC doing about C2, anyway?  When the Wireline Competition Bureau released their Report on Category 2 Funding, I wondered if the next step would be an NPRM.  I mean, it seems like they'd have to do one, no?  They did request comment on C2 budgets back in 2017, but that doesn't count as an NPRM, does it?

If no Order is issued, applicants who applied for C2 in FY 2015-2016, as well as applicants who have never applied for C2, would find themselves back under the 2-in-5 Rule for FY 2020-2021.  (Applicants who first filed for C2 in FY 2016-2017 would go back to 2-in-5 in FY 2021-2022, and so on; as their 5-year budgets expired, applicants would go back to 2-in-5.)

If the FCC is going to release an Order, I'd think it would be before the Eligible Service List is prepared.  At this point, I don't think that leaves enough time for an NPRM.  An interim Order would create more chaos, as applicants try to figure out if they should lock into a new 5-year cycle, or see if something better is coming.

Here's a question that I would not have considered back in 2014: would a return to 2-in-5 be a bad thing?  I mean, the worst part of the 2-in-5 Rule was that most applicants never got a sniff of C2 funding.  With the vastly increased cap and everything but broadband tossed out of C1, we wouldn't run out of money unless applicants started requesting more than $600/student.  That might be enough.  But there are other problems with 2-in-5.  So if we're not going to run out of money, how about we go to 5-in-5?  Request whatever you need whenever you need it.

You can say it's stupid, but in the WCB's C2 report, they said that $150/student was enough. (Well, they said the "budget approach appears to be sufficient for most schools and libraries," but then they went on to talk about how few schools had spent all their money, so they were basically saying that $150/student was enough.  So if applicants don't need more than $150/student, then why not just get rid of the restriction, and let them spend what they need?  Even if applicants spend $300/student every 5 years, we'll stay under cap.  The only argument for keeping the cap so low is that applicants don't need more.

So let's try it: everyone can request all the C2 they want.  If it turns out that the WCB was wrong about C2 needs and demand exceeds the program cap, then approve applications on a first-come, first-served basis.  Yes, EPC might buckle under the weight of applicants trying to be the first to submit, but the strain would probably be less than the current strain at the end of the window.

But wait, why have a gold rush of applicants jumping on EPC at the start of the filing window?  Why have a filing window?  If we're approving applications as they arrive, there is no need for a filing window.  

And since C2 caps and 2-in-5 would both be gone, we'd no longer have a need for C1 and C2, would we?

Well, I did not expect to end up there, but wouldn't it be loverly?

The Bus is Back

Some in Congress are trying to force the FCC to allow WiFi on buses.  When I blogged about WiFi on buses five years ago, I was not sanguine on the idea.  Now, I'm OK with it.

But in order to meet the expectations of long-time readers, I'll start with my complaints about the idea.

First, is the Digital Divide (or Homework Gap or whatever) a big problem?  In a 2017 survey, only 13% of students said they sometimes they cannot do homework because they lack Internet access outside of school.  OK, it was an online survey, but still....

Second, we can't solve the Digital Divide (or Homework Gap or whatever) during the bus ride home. 

1. Only about half of kids take the bus. 
2. Bus rides aren't long for most kids.  How long?  Well...
1. One vendor says 40 minutes a day.
2. North Carolina's DOE says 24 minutes/ride, 48 minutes a day.
3. Arkansas says 49 minutes each way, 98 minutes a day.
4. In West Virginia, it's 40.7 minutes in the morning, 81.4 minutes a day.
5. The largest research study I found (covering rural schools in 5 states) showed that even in rural areas, 15% of kids rode less than 30 minutes, 75% less than 60 minutes.
3. Bus WiFi is only useful if connected to the Internet.  How stable is the Internet connection on those long rural routes?  I predict a new excuse: "The bus WiFi ate my homework."

Third, connectivity is half the problem.  The other half is a device.  Students can only work on the bus if their district allows them to take laptops or netbooks home.  A 2017 survey found that 14% of schools give students a computer to take home [skip to slide 19 of the presentation].


On to the things I like.

First, we have the money.  The program is nowhere near cap, so an additional $250 million per year won't break the bank. (484,000 school buses x $44.97/month x $12 months)

Second, some school districts are using school buses as neighborhood access points.  Just park the bus near the end of its route, leave the WiFi on overnight, and boom! you've lit up that neighborhood.  Assuming, of course, that the neighborhood has good cell phone reception.

Third, it gives the kids something productive to do on the ride home.  Assuming that you can lock down the Internet access to prevent the kids from having any fun.

I said I was OK with it.  I didn't say I loved it.

Cowabunga

The first wave is out!  And it's a big one.  USAC's New Brief on the subject says that over half of the applications got an FCDL.  We've had bigger waves, but we've never had one this large so early.

It's definitely the low-hanging fruit.  Why do I say that?

1. The News Brief  says that commitments were issued for 18,500 applications and 24,000 FRNs.  So they vast majority of the applications approved had 1 FRN.  
2. While over half the applications were funded, only 18% of the requested funding was committed. So the amount of funding per application was way below the average.
3. Only 6% of the funding is for Category 2, while 34% of the funding requested was for C2. So they avoided C2 for the most part.

Here's a table to put this wave in historical perspective.

FY	Window close	Days passed	PIA approved	Days passed	First FCDL	Total days	Million	Apps
2019	3/27/19	0	3/27/2019	31	4/27/19	31	$530	18,500
2018	3/22/18	6	3/28/2018	23	4/20/2018	29	$501*	15,033*
2017	5/11/2017	1	5/12/2017	14	5/26/2017	15	$47	4,919
2016	5/26/2016	14	6/9/2016	7	6/16/2016	21	$17	2,251
2015	4/16/2015	-27	3/20/2015	62	5/21/2015	35	$151	7,100
2014	3/26/2014	-19	3/7/2014	69	5/15/2014	50	$607	14,600
2013	3/14/2013	57	5/10/2013	19	5/29/2013	76	$130	12,023
2012	3/20/2012	35	4/24/2012	77	7/10/2012	112	$646	23,800
2011	3/24/2011	75	6/7/2011	19	6/26/2011	94	$398	18,500
2010	2/11/2010	91	5/13/2010	13	5/26/2010	104	$429	18,200
2009	2/12/2009	49	4/2/2009	26	4/28/2009	75	$134	6,931
2008	2/7/2008	63	4/10/2008	21	5/1/2008	84	$352	10,000
2007	2/8/2007				4/23/2007	74	$202	21,000
2006	2/16/2006				4/26/2006	69	$184	4,880
2005	2/17/2005				6/27/2005	130	$342	7,700
2004	2/4/2004				4/27/2004	83	$43
2003	1/16/2003				5/1/2003	105	$230
2002	1/17/2002				4/24/2002	97	$233	9,300
2001	1/18/2001				7/23/2001	186	$478
2000	1/19/2000				4/14/2000	86	$253	13,000
1999	3/11/1999				7/13/1999	124	$116	6,000
1998					11/23/1998		$73	3,000

*The FY 2018 first wave was released it on in two waves, on 4/20 and 4/21; I'm counting those as one wave.