Everyone seems pretty sanguine about the prospects for the E-Rate program under Obama and his pick for FCC Chairman, Julius Genachowski. So, of course, I'll take the contrarian view.
I'll start by talking about how the E-Rate managed to survive the Bush presidency and Rep. Joe Barton, who openly campaigned for it's demise. When Bush arrived in office, he wanted to end the E-Rate. What stopped him? I think it was the discovery that the funding never goes into the Treasury, so abolishing the E-Rate would not have freed up money for other priorities. And since the E-Rate brings money into every Congressional district in the country, Congress is reluctant to just kill it. Seeing that he couldn't outright kill it, Rep. Barton correctly reasoned that if he could get the E-Rate into the Treasury, he could "bleed it dry": once the E-Rate was just one of many competing priorities, it could slowly be cut and cut and cut. He was working on that until he lost his chairmanship when the Democrats took over the House.
Now here comes the Obama presidency, and everybody's happy with his new pick for FCC Chairman. They're both tech-friendly, and Genachowski even helped pen the original Report and Order. And Obama's Technology and Innovation Plan seems very pro-E-Rate. It sounds like he's going to expande the E-Rate: "Obama will recommit America to ensuring that our schools, libraries, households and hospitals have access to next generation broadband networks. He will also make sure that there are adequate training and other supplementary resources to allow every school, library and hospital to take full advantage of the broadband connectivity." (Will training become eligible? Or is it already?)
Nothin' but blue skies.
So what's that dark little cloud on the horizon?
Well, as more and more programs are paid from the Universal Service Fund, there will be pressure to take money from the E-Rate. How about those rollover funds we get every year? Why not take that unused funding and roll it into funding home broadband connections? I mean, every school has broadband, but most houses don't, so where is the priority? In the past, I worried that the ballooning High Cost program would take funding from the E-Rate. Now it looks like new programs will be competing for Universal Service funds.
How ironic if Rep. Barton's dream of killing the E-Rate comes true because of an expansion of the Universal Service Program.
Tuesday, January 27, 2009
Friday, January 16, 2009
I've got your maintenance right here
I just saw a request filed with the FCC from a service provider about Basic Maintenance of Internal Connections (BMIC). I don't know how the service provider would feel about me bandying their name about, so I'll just use "SP" to refer to them.
SP correctly identified a basic problem with BMIC: no one gets approval for these contracts in time to cover July, so now they have to decide whether to front the money in the hopes of later approval, or forego maintenance. But the remedy that SP proposes falls short.
SP suggests that applicants be allowed to make an annual payment, then if funding isn't approved, decide what to do at that point. But the math doesn't work: we're talking about 90% applicants, so if they're paying 10% of the contract amount, that will cover just over a month. As a result, in early August the applicant still won't have funding approval, and the 10% payment will have run out.
A single annual payment is half the solution. The other half is to allow applicants to pay get funding for the annual payment even if the contract does not run July 1-June30.
That would allow applicants to set up maintenance contracts to run June-May.
Let me give an example. Let's say the change I'm suggesting is implemented for 2009-2010. In that case, an applicant would sign a contract now to cover June 2010-May 2011, and put it on their 471. In that scenario, the applicant doesn't care if their BMIC FRNs are funded by July 1, as long as they get funded before the end of the funding year.
True, the first year would be ugly: applicants would have to have one contract to cover July 2009-May 2010, and another to cover June 2010-May 2011. But in subsequent years, it would be much better for applicants.
SP correctly identified a basic problem with BMIC: no one gets approval for these contracts in time to cover July, so now they have to decide whether to front the money in the hopes of later approval, or forego maintenance. But the remedy that SP proposes falls short.
SP suggests that applicants be allowed to make an annual payment, then if funding isn't approved, decide what to do at that point. But the math doesn't work: we're talking about 90% applicants, so if they're paying 10% of the contract amount, that will cover just over a month. As a result, in early August the applicant still won't have funding approval, and the 10% payment will have run out.
A single annual payment is half the solution. The other half is to allow applicants to pay get funding for the annual payment even if the contract does not run July 1-June30.
That would allow applicants to set up maintenance contracts to run June-May.
Let me give an example. Let's say the change I'm suggesting is implemented for 2009-2010. In that case, an applicant would sign a contract now to cover June 2010-May 2011, and put it on their 471. In that scenario, the applicant doesn't care if their BMIC FRNs are funded by July 1, as long as they get funded before the end of the funding year.
True, the first year would be ugly: applicants would have to have one contract to cover July 2009-May 2010, and another to cover June 2010-May 2011. But in subsequent years, it would be much better for applicants.
Wednesday, January 07, 2009
Will you be audited?
Lots of people have been asking how likely they are to audited. Well, I can't say for sure how this year's audits were assigned, but it's a safe bet that it will be similar to last year. So here is a table form the most recent OIG report:
So an applicant that gets less than $100,000 has very little chance of an audit. Getting over $500,000? You can expect an audit every 4 years.
It's nice to know that the FCC is basically leaving the small applicants alone.
| Stratum | Disbursement amounts | Number of applicants | Number of audits | Likelihood of audit |
| 1 | Over $10 million | 10 | 10 | 100% |
| 2 | $500,000 to $10 million | 468 | 114 | 24.4% |
| 3 | $100,000 to $500,000 | 1,780 | 105 | 5.9% |
| 4 | $10,000 to $100,000 | 8,086 | 26 | 0.3% |
| 5 | >$.01 to $10,000 | 10,101 | 5 | 0.0% |
| Total | 20,445 | 260 | 0.3% | |
So an applicant that gets less than $100,000 has very little chance of an audit. Getting over $500,000? You can expect an audit every 4 years.
It's nice to know that the FCC is basically leaving the small applicants alone.
Tuesday, December 23, 2008
Not in my sandbox
I was just reading about a ex parte presentation to the FCC to have the Universal Service Fund pay for a "Fiber to the Library" initiative. I like the idea of the initiative, but I don't like the idea of having the E-Rate pay for 100% of it.
The thing that turned me against it was the assertion that libraries are more deserving of funding than schools because libraries "serve everyone." Well, I think if you went to any community in the country and counted up the number of people who visit a school in a year and compare it to the number of people who visit a library, the school wins. Compare the number of people who use the Internet in a school and the number of people who use the Internet in a library, and the school wins bigger. Compare the number of devices connected to the Internet or the amount of bandwidth used, and the schools win even bigger.
While libraries serve everyone in theory, in fact schools serve more people and make more use of the Internet.
I'm all for libraries getting their fair share of E-Rate funding. But nothing should be funded 100% by E-Rate. And no preference should be given to schools over libraries, or libraries over schools.
The thing that turned me against it was the assertion that libraries are more deserving of funding than schools because libraries "serve everyone." Well, I think if you went to any community in the country and counted up the number of people who visit a school in a year and compare it to the number of people who visit a library, the school wins. Compare the number of people who use the Internet in a school and the number of people who use the Internet in a library, and the school wins bigger. Compare the number of devices connected to the Internet or the amount of bandwidth used, and the schools win even bigger.
While libraries serve everyone in theory, in fact schools serve more people and make more use of the Internet.
I'm all for libraries getting their fair share of E-Rate funding. But nothing should be funded 100% by E-Rate. And no preference should be given to schools over libraries, or libraries over schools.
Tuesday, December 16, 2008
Holiday cheer
Today a holiday tradition brought a smile to my lips. That's nice, except the tradition I'm talking about is on the USAC home page: the countdown to the end of the filing window. It just strikes my funny bone that the countdown includes the number of seconds until the window closes.
Once upon a time, seconds mattered. I can't find the appeal, but I remember back in the bad old days, an applicant drove a long way to a post office open until midnight (I seem to remember a snow storm involved). The courier arrived at 11:59, but didn't get to the front of the line until 12:01 (a line at the post office at midnight?). The FCC said, "Sorry, denied. You should have applied earlier." (OK, that's not a real quote. Here's a real one: "We find that the above-captioned Petitioners have not demonstrated special circumstances to warrant waiver. The Commission has strictly and consistently enforced filing deadlines, allowing waivers of deadlines only in very limited and compelling situations. In light of the large number of applications that the Schools and Libraries Division (SLD) of USAC reviews and processes each year, it is administratively necessary to place on the applicant the responsibility of complying with all relevant rules and procedures, including filing deadlines. Hence, employee illness, staff failure to perform a job properly, inclement weather, or misunderstanding of the rules does not relieve applicants of their responsibility to comply with the Commission’s rules and procedures. Further, the assertion that denial of an application may have a detrimental impact on an applicant does not create special circumstances or suggest particular facts that warrant a waiver of the Commission’s rules.")
Bishop Perry hasn't been around as long, but he sure spreads as much joy in the E-Rate community as that bishop from Izmir.
Once upon a time, seconds mattered. I can't find the appeal, but I remember back in the bad old days, an applicant drove a long way to a post office open until midnight (I seem to remember a snow storm involved). The courier arrived at 11:59, but didn't get to the front of the line until 12:01 (a line at the post office at midnight?). The FCC said, "Sorry, denied. You should have applied earlier." (OK, that's not a real quote. Here's a real one: "We find that the above-captioned Petitioners have not demonstrated special circumstances to warrant waiver. The Commission has strictly and consistently enforced filing deadlines, allowing waivers of deadlines only in very limited and compelling situations. In light of the large number of applications that the Schools and Libraries Division (SLD) of USAC reviews and processes each year, it is administratively necessary to place on the applicant the responsibility of complying with all relevant rules and procedures, including filing deadlines. Hence, employee illness, staff failure to perform a job properly, inclement weather, or misunderstanding of the rules does not relieve applicants of their responsibility to comply with the Commission’s rules and procedures. Further, the assertion that denial of an application may have a detrimental impact on an applicant does not create special circumstances or suggest particular facts that warrant a waiver of the Commission’s rules.")
Bishop Perry hasn't been around as long, but he sure spreads as much joy in the E-Rate community as that bishop from Izmir.
Monday, December 15, 2008
New math
Oh, I forgot to mention one thing that puzzled me about Table 4 in the OIG's Audit Analysis. It shows the percentage of applicants that failed for each of the 21 different causes. For a few of the listed causes, the OIG said 0.1% of applicants failed for that reason. It's been a long time since I took a math course, but I'm sure 0.1% is one in a thousand. There were only 260 audits.
If one applicant failed for a given reason, that would be 0.4% of the sample (OK, 0.3846%, but we're rounding up).
How could any percentage less than 0.4% appear in that table? Am I missing something?
If one applicant failed for a given reason, that would be 0.4% of the sample (OK, 0.3846%, but we're rounding up).
How could any percentage less than 0.4% appear in that table? Am I missing something?
Friday, December 12, 2008
Why we fail
The FCC's Inspector General (OIG) has released its analysis of Round 2 audits. And the picture is not pretty.
The bottom line is that the E-Rate program is nowhere near making the 2.5% threshold for improper payments, so we're getting more audits. But we already knew that.
I dumped the results into a spreadsheet, just to see what jumped out at me. Here's what jumped out:
Two of the audits accounted for 50% of the total amount of improper payments from the 260 audits. A curse on those two applicants for making us all look bad! Oh, wait, they've already been cursed with multi-million-dollar COMADs.
Of the 260 audits, only 93 did not result in recovery. Over 64% of applicants made some kind of error. How can we change that? Simplify, simplify, simplify. I came up with a couple thousand pages of rules without even trying.
OIG came up with 21 causes for improper payments. Among those causes that the auditors found resulted no errors:
There were four causes associated with FCC rules:
Because as it is, the results make it appear that applicants understood the rules and chose to violate them. I'm sure that happens, but not anywhere near 44% of the time.
The bottom line is that the E-Rate program is nowhere near making the 2.5% threshold for improper payments, so we're getting more audits. But we already knew that.
I dumped the results into a spreadsheet, just to see what jumped out at me. Here's what jumped out:
Two of the audits accounted for 50% of the total amount of improper payments from the 260 audits. A curse on those two applicants for making us all look bad! Oh, wait, they've already been cursed with multi-million-dollar COMADs.
Of the 260 audits, only 93 did not result in recovery. Over 64% of applicants made some kind of error. How can we change that? Simplify, simplify, simplify. I came up with a couple thousand pages of rules without even trying.
OIG came up with 21 causes for improper payments. Among those causes that the auditors found resulted no errors:
- USAC error
- Solix error
- NECA error
There were four causes associated with FCC rules:
- Imprecise FCC Rule/s
- Contradictory FCC Rule/s
- Overly Complex FCC Rule/s
- Disregarded FCC Rule/s
Because as it is, the results make it appear that applicants understood the rules and chose to violate them. I'm sure that happens, but not anywhere near 44% of the time.
Subscribe to:
Posts (Atom)