The last day of the filing window is a day of error messages.
The Form 471 tool got sluggish for a little while this afternoon, but has been pretty solid. But once the West Coast got into their offices, the sluggish Online Item 21 Attachment tool completely bogged down. Not only was it taking 45 seconds to get to the next screen, the MCBC (Mean Clicks Between Crash) was about 3, and since it takes at least 9 clicks to create and submit an attachment, not much has been getting done. It seems worse than usual. Could it be a denial of service form the folks at the Item 21 Portal? Just kidding.
Anyway, USAC has committed to a grace period for submitting Item 21 Attachments online. There has always been a grace period, but I think this is the first year that the period has been confirmed beforehand.
My favorite error message of the day: When you Create a Form 471, the first screen is a search for your BEN. If you put anything but a number in the search box, you get: "The search value must be a positive whole number." I feel like I'm back in 7th grade math.
Best experience of this filing window: There is some combination of clicks that actually puts you in Block 2 (or Block 3 if it's a library application). Really, I did not imagine it, and I'm not the only one it's happened to. I'm enough of a geek that it felt cool, like finding your way into a hidden crypt. But the funniest part is that once you're in there, you can't get out without filling in at least one box. I have a mental image of some database geek at USAC poking around and discovering Block 2 information associated a 2014 application and wondering how it got there. I wish I could have typed in a message like "the cake is a lie," but all the boxes in Block 2 only want positive whole numbers.
Wednesday, March 26, 2014
Sunday, March 23, 2014
Fun with discounts
I don't think highly of consortium purchasing, but I thought of one more way the FCC could make consortiums more widespread: get rid of the discount matrix. If all applicants got a 65% discount, it would remove one impediment to consortium membership. Imagine you are a 90% applicant, and you're offered membership in a consortium for bandwidth. Joining the consortium would cut the cost of your bandwidth in half. You have to go for it, right? Not so fast. What is the consortium's discount? If the consortium will get less than an 80% discount, your net (post-discount) cost will actually go up. Think it over: if your $1,000 pre-discount cost was cut to $500, but your discount dropped from 90% to 70%, your net cost would go from $100 (10% of $1,000) to $150 (30% of $500).
It's rarely a good idea to join a consortium with applicants that have a lower discount, unless the consortium charges high-discount districts less than low-discount districts (and I haven't seen that). Otherwise, the other consortium members are taking money out of your pocket. The FCC could change that by tossing the discount matrix; if everyone has a 65% discount, then no one has to worry if they're losing funding.
The fun you can have with consortium discounts first occurred to me when I worked for a small district with a 90% discount, surrounded by districts with discounts of 20-40%. I did an Internet pairing grant with a large 40% district, so conceptually, it made sense to file a consortium application. However, I looked at the numbers, and my district would have lost money.
But check it out: the consortium as a whole would have gotten more E-Rate funding than we did as separate entities. Because consortia do a straight average of members' discounts. So it didn't matter that our 40% partner was 4 times as large; we would both have gotten a 65% discount. (If we'd had to do a weighted average, the discount would have been 50%.) Since their costs were much higher than ours, the extra 25% they got in funding would have been much larger than the 25% we lost. But I couldn't figure out an ethical way for that big district to compensate my little district for the increase in their E-Rate funds, so we filed separately.
And, of course, I wondered if you could take it to an extreme. Does a consortium have to serve all the schools in a district? Typically, consortium members include all their schools in the Block 4 sub-worksheet for the district, but could I include only some of the schools in a district in the sub-worksheet, if only those schools are being served? I can see a lot of ways to play with that. Now take it a step further: a lot of districts should file as a consortium. Because NSLP participation tends to fall off as kids get older (free lunches are not cool), and schools tend to get larger. A district with 300 kids per grade level might look like this:
If that district does the normal district weighted average, it gets a 63% discount. But if it files as a consortium, with each school as a separate consortium member, it gets a 72% discount.
It's rarely a good idea to join a consortium with applicants that have a lower discount, unless the consortium charges high-discount districts less than low-discount districts (and I haven't seen that). Otherwise, the other consortium members are taking money out of your pocket. The FCC could change that by tossing the discount matrix; if everyone has a 65% discount, then no one has to worry if they're losing funding.
The fun you can have with consortium discounts first occurred to me when I worked for a small district with a 90% discount, surrounded by districts with discounts of 20-40%. I did an Internet pairing grant with a large 40% district, so conceptually, it made sense to file a consortium application. However, I looked at the numbers, and my district would have lost money.
But check it out: the consortium as a whole would have gotten more E-Rate funding than we did as separate entities. Because consortia do a straight average of members' discounts. So it didn't matter that our 40% partner was 4 times as large; we would both have gotten a 65% discount. (If we'd had to do a weighted average, the discount would have been 50%.) Since their costs were much higher than ours, the extra 25% they got in funding would have been much larger than the 25% we lost. But I couldn't figure out an ethical way for that big district to compensate my little district for the increase in their E-Rate funds, so we filed separately.
And, of course, I wondered if you could take it to an extreme. Does a consortium have to serve all the schools in a district? Typically, consortium members include all their schools in the Block 4 sub-worksheet for the district, but could I include only some of the schools in a district in the sub-worksheet, if only those schools are being served? I can see a lot of ways to play with that. Now take it a step further: a lot of districts should file as a consortium. Because NSLP participation tends to fall off as kids get older (free lunches are not cool), and schools tend to get larger. A district with 300 kids per grade level might look like this:
|
Grades
|
# of
schools
|
Enrollment
Per school
|
NSLP %
|
|
K-5
|
6
|
300
|
80
|
|
6-8
|
2
|
450
|
60%
|
|
9-12
|
1
|
1200
|
40%
|
I've got to think PIA would quash that, but I wonder if it's been tried.
Monday, March 17, 2014
Wheeler? More like Circular Sawyer
Commissioner Wheeler spoke at the Council of Chief State School Officers Legislative Conference today. The transcript is online. Let's see if there is any information beyond what's been in his recent speeches and statements.
First, the analysis you're dying for: did the Chairman capitalize the "R" in "E-Rate"? Yes! I counted 46 uses: 43 were capitalized, 2 were not, and once he put E-RATE in all caps for emphasis.
As usual, I will eschew a reasoned critique of the speech, and just respond to what jumps out at me.
"At the end of this process, the way in which we pay for certain things may need to change. And the things that have historically been paid for by E-Rate may no longer qualify." We've heard that before, but then the Chairman gets specific. Here's the list, and my estimate of the savings to the program (based on this table and guesswork). Of course, I'll give my opinion.
"I will not hesitate to recommend [raising the contribution rate] should it be warranted." When are you going to make up your mind about whether it's warranted? Because the rest of us in the E-Rate community have made up our minds. Does he want to uncap the E-Rate, and raise the contribution level to cover the April 2015 Demand Estimate (which will show what it will cost to cover the cost of the reformed E-Rate)? My very conservative estimate was that the program will need more than $3 billion per year. FFL estimated $6.8 billion. So even if we cut services worth $600 million, the fund will need to double, if not triple.
"Within the FCC I will soon be announcing a special strike force...to make certain there is adherence to the rules...." "Strike force"?! Suddenly, I feel like a Crimean Tatar. Those of us in the applicant community feel battered enough without being hit by a strike force. I'm sure venture capitalists often use military metaphors, but librarians and teachers do not.
"First, why is it that the prices paid by like schools in like circumstances vary so widely?"
"... only a united front will move the E-Rate program forward." You heard the man! Everybody unite behind my suggestions!
All in all, not a bad speech. I think Chairman Wheeler was pretty upfront about the pain that's coming to applicants who count on the E-Rate to cover 90% of their phone bill. I just wish he would acknowledge that the fund needs to increase, and lay off on the "strike force" rhetoric.
First, the analysis you're dying for: did the Chairman capitalize the "R" in "E-Rate"? Yes! I counted 46 uses: 43 were capitalized, 2 were not, and once he put E-RATE in all caps for emphasis.
As usual, I will eschew a reasoned critique of the speech, and just respond to what jumps out at me.
"At the end of this process, the way in which we pay for certain things may need to change. And the things that have historically been paid for by E-Rate may no longer qualify." We've heard that before, but then the Chairman gets specific. Here's the list, and my estimate of the savings to the program (based on this table and guesswork). Of course, I'll give my opinion.
- "Narrowband pagers." <$1 million. Yup, cut them loose. "Paging" always created confusion among schools, which still do intercom paging. What's with the "narrowband"? Aren't all pagers narrowband now? If there are any wideband pagers in the wild, will they still be eligible? It is amusing that "narrowband" and "broadband" sound like opposites, even though they have nothing to do with each other.
- "Legacy PBX systems are an historic relic." $0 (no PBX funding in 2013-2014). Do you mean legacy as in "outmoded" or as in "not Internet-dependent"? If all voice is getting chucked, then voice hardware should go, too.
- "Mobile phones." $176 million. Chalk one up for Don Quixote!
- Email. $10 million. Why should the E-Rate pay for email when Google is offering free email in exchange for being able to mine student emails and send them ads?
- Text messaging: $0.02 million. Absolutely.
- Slow speed connectivity. I can't estimate this without knowing the "slow speed" cutoff; chopping T-1s would save $142 million. Now this idea will create some heat. The two reasons that schools don't have high-speed connections are: 1) can' t afford it, or 2) don't need it. Is the FCC really going to say, "Those bonded T-1s are too poky: if you want E-Rate funding, you're going to have to spend $200,000 to get fiber pulled to your school?" or "Your usage never exceeds 20 Mbps, but the President says you need 100 Mbps. Upgrade or lose your funding." This is the E-Rate equivalent of "The floggings will continue until morale improves." The poorest, smallest, most remote schools would be exclude from funding for connectivity, because even their discounted share for 100 Mbps would be out of reach. Is that what we're aiming for?
- Domain name registration. $0.001 million. Please, yes. I hate filing FRNs with a pre-discount amount of $24.95, but I can't tell my clients that their $9.98 in funding isn't worth going after.
- Web hosting. $27 million. Batten down the hatches! A wave of spamments is on the way.
- 800 number services. $0.085 million. How did this get on the list in the first place? It's basically paying the toll charges for calls from ineligible locations.
- Analog voice. $377 million. Don Quixote strikes again! The Chairman dances around, talking about "evolve" and schools deciding to move to digital voice, but it's clear that POTS lines are in the crosshairs. I would toss out all voice, digital and analog. Why leave VoIP in there? It hardly seems technology-neutral to make determinations on the eligibility of voice based on transmission protocol. And where does that leave PRIs? They are digital circuits, but the only work with "legacy" PBXes, and whacking them would save us another $51 million. We'd better tighten up the jargon, too: a lot of people hearing "digital voice" will think of digital handsets, which are phones that interface with a traditional PBX. If you want to separate VoIP from other voice protocols, call it VoIP, not digital voice.
- What should be on this list, but is not: video. $6 million for Distance Learning/Video Conf. Only transport of video is eligible, and video is transported over IP, so let's toss video out of the program.
"I will not hesitate to recommend [raising the contribution rate] should it be warranted." When are you going to make up your mind about whether it's warranted? Because the rest of us in the E-Rate community have made up our minds. Does he want to uncap the E-Rate, and raise the contribution level to cover the April 2015 Demand Estimate (which will show what it will cost to cover the cost of the reformed E-Rate)? My very conservative estimate was that the program will need more than $3 billion per year. FFL estimated $6.8 billion. So even if we cut services worth $600 million, the fund will need to double, if not triple.
"Within the FCC I will soon be announcing a special strike force...to make certain there is adherence to the rules...." "Strike force"?! Suddenly, I feel like a Crimean Tatar. Those of us in the applicant community feel battered enough without being hit by a strike force. I'm sure venture capitalists often use military metaphors, but librarians and teachers do not.
"First, why is it that the prices paid by like schools in like circumstances vary so widely?"
- Prices drop every year, and applicants generally lock in for 3 years or more.
- The Form 470 process prevents schools from finding the best price.
- Service providers ignore the Lowest Corresponding Price rule.
- When you have a 90% discount, money is no object.
- Services that look the same can be different under the hood. Around here, 100 Mbps over FiOS or a cable modem costs about $200/month, while 100 Mbps over metro Ethernet costs over $1800/month. Same bandwidth number, same service provider, 9 times the price.
- Circumstances may not be as like as they appear. A few miles can make a huge difference in price, depending on things like installed infrastructure, cable franchise, line of sight.
- Free the Item 21 Attachments!
- Enforce your Lowest Corresponding Price rules. Make service providers tell applicants their LCP.
- Toss the Form 470. Allow applicants to negotiate contracts as they see fit.
- Allow applicants to make operational SPIN changes any time they want.
- Don't force applicants to sign illegal contracts locking in prices 3-4 months before service starts.
- Lower the top discount levels.
"... only a united front will move the E-Rate program forward." You heard the man! Everybody unite behind my suggestions!
All in all, not a bad speech. I think Chairman Wheeler was pretty upfront about the pain that's coming to applicants who count on the E-Rate to cover 90% of their phone bill. I just wish he would acknowledge that the fund needs to increase, and lay off on the "strike force" rhetoric.
Sunday, March 16, 2014
A little fact-checking
Over on The Hill's blog, a couple of economists have blasted the E-Rate. I think that Evan Marwell of EducationSuperHighway did a pretty good rebuttal on the question of whether schools need more bandwidth, so I'm going to stick to fact-checking the first post, because it seemed full of misinformation. Follow along as I read the screed.
What's this about funding being moved from the Connect America Fund (née High Cost Program)? Check it out: there is over $1 billion sitting in reserve over there (see page 10 of this report). Is the FCC going to transfer that to the E-Rate? Let's take a look at paragraph 561 of the USF/ICC Transformation Order: "Excess contributions shall instead be credited to a new Connect America Fund reserve account, to be used as described below." What's the description below? "we direct USAC to use the balances accrued in the CAF reserve account to reduce high-cost demand to $1.125 billion in any quarter that would otherwise exceed $1.125 billion." Nothing about E-Rate. Not that the Commission doesn't waive its own rules when it wants to, but I don't think they've ever moved funds between programs. I'm betting that money stays in the CAF.
"...the money comes largely from low-income telephone users...." "Largely" makes it sound like the majority of the fund comes from the poor. I find that hard to believe. I don't know of any figures describing how much of the fund comes from low-income phone users, but it's hard to see how the poorest 16% of our population (that's the percentage below the poverty line) has higher telephone costs than the rest of the population plus all the businesses in the country. Even if you expand "low-income" to 25% of the population, and say "largely" means "25%," I'm not buying that the poorest 25% of our population spends as much on interstate telephone services as the other 75% of the population plus all the businesses.
"As of 2008 (the year for which the most recent government data exist), 98 percent of public schools were broadband connected...." Yes, but "broadband" is an imprecise and moving target. In 2008, "broadband" meant maybe 1.5 Mbps or 3 Mbps. Now I expect 5 times that speed to my cell phone.
So we just need enough bandwidth to allow access to Khan Academy? OK, let's see what bandwidth Khan Academy recommends: " it's best to plan for >1 Mbps per student or device." Hey, what do you know, that means that the higher ConnectED goal, the aspirational goal of 1 Gbps per 1,000 students, is just a little bit too small. So let's skip right over the 100 Mbps/1,000 student goal.
"The Government Accountability Office has repeatedly criticized E-Rate programs...." And by "repeatedly," you mean "thrice." In 2005, 2009 and 2010. Interesting how the GAO stopped generating reports once Rep. Joe "Bleed the E-Rate Dry" Barton stopped requesting them. Nevertheless, the GAO had some valid criticisms.
"...school districts are using the money to buy fancy 'Promethean Boards' to replace white boards." Not exactly. The Montgomery County Superintendent wants to use the reimbursements they receive from E-Rate to make lease payments on Promethean Boards. Montgomery County does what many applicants do: they pay the full amount of their phone and Internet bills, then at the end of the year they file reimbursement requests. When those reimbursements comes in, they are free to use it however they want. I agree it sounds fishy to say they're using E-Rate funds to purchase the boards, but there's nothing improper going on. The E-Rate is subsidizing telecommunications and Internet costs, but the district is choosing to apply the subsidy to purchasing the boards rather than applying it to their telecom budget.
"...a 2013 expose found that over $3 million had flowed to an orthodox Jewish high school where students are forbidden to use computers...." Yes, that does look like program abuse. And it's not limited to NYC.
“'E-Rate' is now called 'ConnectEd.'” Nope. Two different things. The E-Rate will help fund ConnectED, along with some contributions from the private sector to cover those parts of the ConnectED program that are not eligible for E-Rate funding.
"...the tax that funds it falls disproportionately on low-income consumers." First, it's not a tax. If the authors had read the 2005 GAO report, they would know that one of the GAO's criticisms of the program was that the USF contribution is not a tax. "Disproportionately"? I don't know. USF contributions are a percentage of interstate telecommunications costs. So for the fee to fall "disproportionately" on the low-income, their interstate telecom expenditures would have to be disproportionately high. I guess it depends on the proportion we're talking about. I would not be surprised if the USF contribution was a higher proportion of family income for low-income families, but I haven't seen any figures on that. But I would bet that the percentage of contributions paid by low-income families is disproportionately low relative to their percentage of the population. Again, I don't have any actual data, though, so I can't say.
"...no justification in law or policy." The Telecommunications Act of 1996 specifies setting up a program to bring advanced telecommunications services to schools.
For an article by a couple of college professors, it seems to me there was a paucity of facts and an excess of unsupported claims. And I'm disappointed that sources weren't cited. I give it a C-.
What's this about funding being moved from the Connect America Fund (née High Cost Program)? Check it out: there is over $1 billion sitting in reserve over there (see page 10 of this report). Is the FCC going to transfer that to the E-Rate? Let's take a look at paragraph 561 of the USF/ICC Transformation Order: "Excess contributions shall instead be credited to a new Connect America Fund reserve account, to be used as described below." What's the description below? "we direct USAC to use the balances accrued in the CAF reserve account to reduce high-cost demand to $1.125 billion in any quarter that would otherwise exceed $1.125 billion." Nothing about E-Rate. Not that the Commission doesn't waive its own rules when it wants to, but I don't think they've ever moved funds between programs. I'm betting that money stays in the CAF.
"...the money comes largely from low-income telephone users...." "Largely" makes it sound like the majority of the fund comes from the poor. I find that hard to believe. I don't know of any figures describing how much of the fund comes from low-income phone users, but it's hard to see how the poorest 16% of our population (that's the percentage below the poverty line) has higher telephone costs than the rest of the population plus all the businesses in the country. Even if you expand "low-income" to 25% of the population, and say "largely" means "25%," I'm not buying that the poorest 25% of our population spends as much on interstate telephone services as the other 75% of the population plus all the businesses.
"As of 2008 (the year for which the most recent government data exist), 98 percent of public schools were broadband connected...." Yes, but "broadband" is an imprecise and moving target. In 2008, "broadband" meant maybe 1.5 Mbps or 3 Mbps. Now I expect 5 times that speed to my cell phone.
So we just need enough bandwidth to allow access to Khan Academy? OK, let's see what bandwidth Khan Academy recommends: " it's best to plan for >1 Mbps per student or device." Hey, what do you know, that means that the higher ConnectED goal, the aspirational goal of 1 Gbps per 1,000 students, is just a little bit too small. So let's skip right over the 100 Mbps/1,000 student goal.
"The Government Accountability Office has repeatedly criticized E-Rate programs...." And by "repeatedly," you mean "thrice." In 2005, 2009 and 2010. Interesting how the GAO stopped generating reports once Rep. Joe "Bleed the E-Rate Dry" Barton stopped requesting them. Nevertheless, the GAO had some valid criticisms.
"...school districts are using the money to buy fancy 'Promethean Boards' to replace white boards." Not exactly. The Montgomery County Superintendent wants to use the reimbursements they receive from E-Rate to make lease payments on Promethean Boards. Montgomery County does what many applicants do: they pay the full amount of their phone and Internet bills, then at the end of the year they file reimbursement requests. When those reimbursements comes in, they are free to use it however they want. I agree it sounds fishy to say they're using E-Rate funds to purchase the boards, but there's nothing improper going on. The E-Rate is subsidizing telecommunications and Internet costs, but the district is choosing to apply the subsidy to purchasing the boards rather than applying it to their telecom budget.
"...a 2013 expose found that over $3 million had flowed to an orthodox Jewish high school where students are forbidden to use computers...." Yes, that does look like program abuse. And it's not limited to NYC.
“'E-Rate' is now called 'ConnectEd.'” Nope. Two different things. The E-Rate will help fund ConnectED, along with some contributions from the private sector to cover those parts of the ConnectED program that are not eligible for E-Rate funding.
"...the tax that funds it falls disproportionately on low-income consumers." First, it's not a tax. If the authors had read the 2005 GAO report, they would know that one of the GAO's criticisms of the program was that the USF contribution is not a tax. "Disproportionately"? I don't know. USF contributions are a percentage of interstate telecommunications costs. So for the fee to fall "disproportionately" on the low-income, their interstate telecom expenditures would have to be disproportionately high. I guess it depends on the proportion we're talking about. I would not be surprised if the USF contribution was a higher proportion of family income for low-income families, but I haven't seen any figures on that. But I would bet that the percentage of contributions paid by low-income families is disproportionately low relative to their percentage of the population. Again, I don't have any actual data, though, so I can't say.
"...no justification in law or policy." The Telecommunications Act of 1996 specifies setting up a program to bring advanced telecommunications services to schools.
For an article by a couple of college professors, it seems to me there was a paucity of facts and an excess of unsupported claims. And I'm disappointed that sources weren't cited. I give it a C-.
E-Rate getting hipper?
How big an E-Rate geek am I? The only think I know about SXSW 2014, a super-cool annual arts/culture/technology extravaganza, is that Commissioner Rosenworcel talked about the E-Rate there. Let's see if it fleshes out her E-Rate 2.0 ideas. She broke it down into 3 sections, so let's do the same.
Speed
Speed
- "In the near term, we want to have 100 Megabits per 1000 students to all of our schools. By the end of the decade, we want to have 1 Gigabit per 1000 students to all of our schools." Nothing new there. It's a little slower climb to 1 Gbps than the SETDA suggestion, but faster to 100 Mbps than ConnectED.
- "...simply bringing these kinds of speeds to schools makes it incrementally less expensive to deploy higher-speed broadband to the homes and businesses nearby." Well, at least she didn't say "anchor institution." I'll grant that in some cases, if a school pays a carrier to lay new fiber, it could lower prices a little. But where fiber exists, the amount of bandwidth a school purchases does nothing to lower prices for anyone else. It could increase prices by increasing demand on a finite supply of fiber, but I doubt that's the case very often.
Simplify
- "I want us to reduce the bureaucracy associated with E-Rate." Hear! Hear!
- "I would like to see multiyear applications." That sounds like a fine idea: if the terms of a 3-year contract are the same, why do I have to keep submitting 471s? Don't look for a huge benefit, though: most schools do not have all their services on multi-year contracts starting and ending at the same time, so now they'll have to keep track of which contracts have to go on a 471 which year. Look for a lot of "oops, I forgot that the multi-year contract which will auto-extend 6 months from now had to go on this year's 471" appeals to the FCC.
- "...more incentives for consortia...." Why? "When schools work together they can navigate the process together and benefit from more cost-effective bulk purchasing." E-Rate purchasing already layers FCC rules on top of state law, and now you want to add in a bunch of independent local government agencies trying to coordinate efforts? And there is no evidence that consortium purchasing is more cost-effective, except a few anecdotal opinions.
- "...greater transparency during the review process.... Critics have charged that our existing process is a bit opaque...." A bit opaque?! 700 pages of secret rules is more than a bit opaque. Keeping secret the records from application review is more than a bit opaque. The FCC consistently denies FOIA requests, in part because it says that the routine processing of funding applications by a for-profit subcontractor to a non-profit contractor to the FCC is a law enforcement action.
Spending Smart
- "...better accounting practices that the FCC has already identified will free up for more E-Rate broadband support...." The practices have been "identified," but not "made public," so I can't say for sure what the practices are. I'm guessing that they're going to take advantage of the ADA exemption to oversubscribe the fund, knowing that applicants won't actually spend all the funding they request. That is not adding to the fund. That is taking future rollover funds and using them this year. So we'll get a bump in available funds for a couple of years, until the oversubcription causes the rollover funds to dry up.
- "...we need to make sure that all E-Rate support is focused on high-speed broadband. To that end, the time has come to phase down the estimated $600 million this program now spends annually on outdated services like paging." What's in that $600 million? I'm betting the amount is calculated using the amounts in this table. I don't see how to get to $600 million without throwing out telephone service, including cell phones.
- "At a minimum, we need to restore the purchasing power of this program by bringing back what inflation has taken away....that is nearly $1 billion. But we should go beyond this...." That's good news! The early rumors swirling around E-Rate 2.0 and ConnectED seemed to be about increasing the size of the program, but Chairman Wheeler seemed to putting that on the back burner. That's bad news; if all the other reform gets done before the funding is increased, I worry that funding won't get increased. Keep up the pressure on this one, Commissioner Rosenworcel!
I didn't really see anything new, but I don't really disagree with anything the Commissioner said, except maybe encouraging consortia. I'm glad she's supposed to be leading the reform agenda.
Debunking the bulk
Many people in the E-Rate community seem to believe that consortia or other bulk purchasing schemes will lead to lower prices. Where's the evidence to support that hypothesis?
As far as I've seen, the only attempt at providing proof came in last summer's NPRM: “the Commission’s Rural Health Care Pilot Program showed that bulk buying through consortia coupled with competitive bidding can reduce the prices that recipients pay for services and infrastructure.” (paragraph 88)
Let's take a closer look.
The NPRM's footnote refers to paragraph 93 of the Healthcare Connect Fund Order, which in turn refers to paragraph 83 of the Wireline Competition Bureau Interim Evaluation of Rural Health Care Pilot Program Staff Report. That report cites 4 examples:
The only "evidence" that prices are lower are the self-serving comments from program participants. There are no actual numbers.
So let me give some examples from here in NJ.
First, a couple of years back, the NJ State Library offered all the libraries in the state a deal: if you connect to one of our three nodes, we'll give you free Internet access. At that time, they put out a state-wide bid for those connections, and they got incredible pricing on circuits from Verizon, which was the only company that had the infrastructure to supply bandwidth to every library in NJ. So with great circuit pricing and a free Internet port, that had to be the best deal for libraries throughout the state, right? For that product, yes. But both Verizon and the cable companies have other Internet access products that are not enterprise-class (think FiOS or a cable modem), but are good enough, and the price is a small fraction of the cost of a circuit to the state library. So for many libraries, the connection to the state library was a wonderful opportunity. For others, there were better options. And the state-wide nature of the bid precluded, for example, the cable companies from bidding, because cable coverage in this state is a patchwork of companies.
Second, we have had for years a statewide cooperative purchasing program for long distance. The state wanted to encourage schools to use the program, so they passed a law saying that schools had to join the cooperative. So I always advised clients to join it. Was it the lowest price they could get? No. I could always find lower prices. In fact, I could get lower prices for individual schools from the same vendor that won the co-op bid. Being a member of that co-op was never the cheapest way to go. But a small district's long distance bill is a few hundred dollars a year, so the savings from lower prices would have been less than $100, so why fight the state? Like many purchasing co-ops, this was more about administrative convenience than about price.
Third, we currently have a state-wide purchasing co-op for Internet bandwidth and VoIP. When they went out to bid, they got good pricing, but not substantially better than members could have gotten on their own. And at this moment, the price for an individual school is 24%-55% lower on bandwidth by contracting individually over joining the co-op. For a 1 Gbps circuit, the co-op can be twice as expensive. And to be clear, I am talking about the pricing from the two vendors that are on the co-op bid. I'm not even talking about looking at alternative vendors like the cable companies, who couldn't bid on a state-wide contract.
Does consortium or bulk purchasing lower costs? Sometimes. Does consortium or bulk purchasing increase costs? Sometimes. Should the FCC be encouraging consortia or bulk purchasing? No. Because if the bulk purchase is the better deal, applicants will go that direction anyway. If the FCC puts its thumb on the scale, it will only have an effect in those cases where the consortium would otherwise not be the most cost-effective, but are made so by E-Rate rules. Do we want to encourage applicants to join consortia that are not otherwise cost-effective?
The FCC should take steps to remove barriers to bulk purchasing. Here are some ideas:
As far as I've seen, the only attempt at providing proof came in last summer's NPRM: “the Commission’s Rural Health Care Pilot Program showed that bulk buying through consortia coupled with competitive bidding can reduce the prices that recipients pay for services and infrastructure.” (paragraph 88)
Let's take a closer look.
The NPRM's footnote refers to paragraph 93 of the Healthcare Connect Fund Order, which in turn refers to paragraph 83 of the Wireline Competition Bureau Interim Evaluation of Rural Health Care Pilot Program Staff Report. That report cites 4 examples:
- a letter from a consortium (Colorado Telehealth Network Feb. 28 Ex Parte Letter) which states that the members got better pricing,
- a letter from a consortium stating that members negotiated individual agreements
- two comments on phone calls that sharing reduced costs, not that prices were reduced (Pilot Conference Call Mar. 13 Ex Parte Letter (PMHA et al.) and Pilot Conference Call Mar. 26 Ex Parte Letter (WNYRAHEC et al.)).
- “Through conversations with Pilot projects, USAC observed that projects were able to obtain lower rates for services and to realize other purchasing efficiencies because the services were competitively bid and the projects purchased services for a consortium of HCPs. In situations where a project chose to bid as a whole network, service providers appeared more willing to provide large discounts because the Pilot projects had a large number of HCP sites.”
- “Based on discussions with Pilot projects and observations during the course of the Pilot program, USAC believes that these consortium arrangements provided the individual HCPs with lower rates.”
The only "evidence" that prices are lower are the self-serving comments from program participants. There are no actual numbers.
So let me give some examples from here in NJ.
First, a couple of years back, the NJ State Library offered all the libraries in the state a deal: if you connect to one of our three nodes, we'll give you free Internet access. At that time, they put out a state-wide bid for those connections, and they got incredible pricing on circuits from Verizon, which was the only company that had the infrastructure to supply bandwidth to every library in NJ. So with great circuit pricing and a free Internet port, that had to be the best deal for libraries throughout the state, right? For that product, yes. But both Verizon and the cable companies have other Internet access products that are not enterprise-class (think FiOS or a cable modem), but are good enough, and the price is a small fraction of the cost of a circuit to the state library. So for many libraries, the connection to the state library was a wonderful opportunity. For others, there were better options. And the state-wide nature of the bid precluded, for example, the cable companies from bidding, because cable coverage in this state is a patchwork of companies.
Second, we have had for years a statewide cooperative purchasing program for long distance. The state wanted to encourage schools to use the program, so they passed a law saying that schools had to join the cooperative. So I always advised clients to join it. Was it the lowest price they could get? No. I could always find lower prices. In fact, I could get lower prices for individual schools from the same vendor that won the co-op bid. Being a member of that co-op was never the cheapest way to go. But a small district's long distance bill is a few hundred dollars a year, so the savings from lower prices would have been less than $100, so why fight the state? Like many purchasing co-ops, this was more about administrative convenience than about price.
Third, we currently have a state-wide purchasing co-op for Internet bandwidth and VoIP. When they went out to bid, they got good pricing, but not substantially better than members could have gotten on their own. And at this moment, the price for an individual school is 24%-55% lower on bandwidth by contracting individually over joining the co-op. For a 1 Gbps circuit, the co-op can be twice as expensive. And to be clear, I am talking about the pricing from the two vendors that are on the co-op bid. I'm not even talking about looking at alternative vendors like the cable companies, who couldn't bid on a state-wide contract.
Does consortium or bulk purchasing lower costs? Sometimes. Does consortium or bulk purchasing increase costs? Sometimes. Should the FCC be encouraging consortia or bulk purchasing? No. Because if the bulk purchase is the better deal, applicants will go that direction anyway. If the FCC puts its thumb on the scale, it will only have an effect in those cases where the consortium would otherwise not be the most cost-effective, but are made so by E-Rate rules. Do we want to encourage applicants to join consortia that are not otherwise cost-effective?
The FCC should take steps to remove barriers to bulk purchasing. Here are some ideas:
- Put consortium applications at the head of the line for PIA. Apparently, Chairman Wheeler did this.
- Get rid of LOAs. The consortium agreement should be enough.
- Reduce the need for the Form 479. Take CIPA certification off the Form 486, and make a separate form. Then allow us to look up online any applicant's CIPA certification status for a particular funding year. Because right now, consortium leads have to chase down Forms 479 from members which have already certified CIPA compliance on a Form 486.
- Allow consortia and co-op members grow after a Form 470 is posted. Currently, the Form 470 has to list the BENs covered, so if applicants later want to join the consortium, they aren't covered by the Form 470. The FCC should allow them to be retroactively covered.
- Don't require consortia to file Forms 470. Even better, scrap the Form 470 all together.
Tuesday, March 11, 2014
Tempest in a portal
One of the duties of this blog, I feel, is to be a sort of People magazine for E-Rate, posting information that you might call news, or you might call gossip. This post has a kind of gossipy goal. But of course, I won't gloss over details, so you'll have to dig to get to the dirt. [I can't decide if that mixed metaphor is ingenious or stupid.]
If you spend much time around ed tech, you may have heard of EducationSuperHighway (ESH). It's an organization dedicated to "removing the roadblocks to high-speed, high-capacity Internet for America’s schools and paving the way for digital learning in every classroom." The have a lot of high-profile donors and partners, and a really nice website.
ESH runs the SchoolSpeedTest, which Chairman Genachowski lauded. Basically, schools were asked to identify their school, then run a simple speed test. The test results were provided to the school, but also collected by EducationSuperHighway, which gave a summary of data to the FCC. I think they have the best collection of data about school's actual Internet speeds. I can't say how good their data is, though, because I don't know how many schools participated in the test. And I can't say if I would agree with their analysis of the data, since only ESH has the data.
ESH's new initiative is the Item 21 Entry Portal (I21P). Basically, they have provided a tool that allows you to enter your Item 21 Attachment (I2A) data on their site, then get an I2A suitable for emailing. I took a look at the tool, and the forms are a little better than USAC's. The I21P also has the ability to do bulk uploads of Item 21 data. I won't be using the portal, but it could be convenient for some people.
The idea behind I21P, though, is to allow ESH to collect all the information in everybody's I2As, to build a big database of information on what schools are using and how much they're paying for it. I think that's a good goal; I've already said the FCC should free the Item 21 Attachments.
So ESH has been sending emails to schools, encouraging them to use the I21P. I will be kicking the decision to my clients, because I won't release their information without their OK. I've told clients that I can't give them legal advice on the release of that info to a third party. Certainly, some service providers won't like having their pricing info shared, but I'm not sure if their claim to privacy for proprietary info stands up against public school and library information being public.
Apparently, I was not alone in my concern. The AASA (the Superintendents Association) and the Association of Education Service Agencies (AESA) posted a joint Q&A about the portal. They were mostly pretty neutral, but they did have a couple of discouraging things to say. T.H.E. Journal published some responses from ESH.
Oh, it's on!
Let's break it down, showing the two sides, and then my assessment:
I think ESH has a problem with their Privacy Policy. It severely limits how they can use Personal and/or Applicant Information (PAI), which is good. PAI is defined as "information that alone or in combination with other information may be used to readily identify, contact, or locate you or the E-rate applicant you represent," which is also good. The problem is that price is PAI. Price is on the 471, so if you tell me an applicant is paying $1,253.53/month for Internet access, I'll tell you in less than 5 minutes the FRN and associated 471 and 470. (If you wanted me to tell you for every applicant in the country, it would take me a while to cook up the right query, but I could do it.) So price transparency would violate the Privacy Policy. They could provide price translucency by rounding pricing off to the nearest $50. Then it would take some detective work to get to PAI, and in some cases I wouldn't be able to say for sure, but in most cases I would be able to say definitively (especially if you give some geographic info), so translucent pricing would still be PAIish.
Price transparency is a laudable goal. But I don't think I21P is the way to get there. At least not the way it's set up now.
1 Sir Francis Bacon, Religious Meditations, Of Heresies, 1597.
For those of you who are thinking it's about time for me to do some grammar woolgathering, I won't disappoint. How does one acronym (or is it "acronate") "Item 21"? I chose to just take the first digit of "21" to form "I2A"; ESH kept the whole number in their "I21P" acronym.
If you spend much time around ed tech, you may have heard of EducationSuperHighway (ESH). It's an organization dedicated to "removing the roadblocks to high-speed, high-capacity Internet for America’s schools and paving the way for digital learning in every classroom." The have a lot of high-profile donors and partners, and a really nice website.
ESH runs the SchoolSpeedTest, which Chairman Genachowski lauded. Basically, schools were asked to identify their school, then run a simple speed test. The test results were provided to the school, but also collected by EducationSuperHighway, which gave a summary of data to the FCC. I think they have the best collection of data about school's actual Internet speeds. I can't say how good their data is, though, because I don't know how many schools participated in the test. And I can't say if I would agree with their analysis of the data, since only ESH has the data.
ESH's new initiative is the Item 21 Entry Portal (I21P). Basically, they have provided a tool that allows you to enter your Item 21 Attachment (I2A) data on their site, then get an I2A suitable for emailing. I took a look at the tool, and the forms are a little better than USAC's. The I21P also has the ability to do bulk uploads of Item 21 data. I won't be using the portal, but it could be convenient for some people.
The idea behind I21P, though, is to allow ESH to collect all the information in everybody's I2As, to build a big database of information on what schools are using and how much they're paying for it. I think that's a good goal; I've already said the FCC should free the Item 21 Attachments.
So ESH has been sending emails to schools, encouraging them to use the I21P. I will be kicking the decision to my clients, because I won't release their information without their OK. I've told clients that I can't give them legal advice on the release of that info to a third party. Certainly, some service providers won't like having their pricing info shared, but I'm not sure if their claim to privacy for proprietary info stands up against public school and library information being public.
Apparently, I was not alone in my concern. The AASA (the Superintendents Association) and the Association of Education Service Agencies (AESA) posted a joint Q&A about the portal. They were mostly pretty neutral, but they did have a couple of discouraging things to say. T.H.E. Journal published some responses from ESH.
Oh, it's on!
Let's break it down, showing the two sides, and then my assessment:
| Issue | AASA/AESA | ESH | On-Tech |
| Slow applications? | Using the I21P "delays the issuance of Funding Commitment Decision Letters." | "USAC does not have a policy that people who file using their online tool get their applications reviewed before people who file with any other manner" | Neither side can prove what they say. I don't think anyone has evidence on whether apps with online I2As get funded faster than paper ones. PIA procedures are secret, so we don't know the policy on processing online I2As first. |
| Use of data | "Participation in the ESH Item 21 Portal represents an E-Rate applicant submitting information to a private group, and that gives us and our members concern." | "will use the information to publish aggregate reports at the national, state and regional level that sort of summarize the key learnings from the information. That we will provide government agencies, including the FCC the United States Department of Education, states and intermediate units, with the specific data that we gather from districts and libraries within their jurisdiction…and that we will give districts and libraries access to both that aggregate information, but also to anonymized detailed information in their region." | If you give the data to the FCC and DOE, how are they going to keep it secret? ESH can't protect the data by claiming it's proprietary to ESH, so FCC and DOE would have to share, I think. The Privacy Policy does not delineate who gets what. The Privacy Policy seems to forbid ESH from giving specific data to anyone, including FCC and DOE. If everyone else gets aggregated data, ESH will have an opportunity to spin the data any way they want, and no one else will have the data to contradict them. "Knowledge is power."1 |
| Who benefits? | "the main beneficiary of the ESH portal is ESH" | "there will be many beneficiaries from participating in this process": FCC, state DOEs, districts and libraries | Both are right: ESH is the main beneficiary, but others will benefit. |
I think ESH has a problem with their Privacy Policy. It severely limits how they can use Personal and/or Applicant Information (PAI), which is good. PAI is defined as "information that alone or in combination with other information may be used to readily identify, contact, or locate you or the E-rate applicant you represent," which is also good. The problem is that price is PAI. Price is on the 471, so if you tell me an applicant is paying $1,253.53/month for Internet access, I'll tell you in less than 5 minutes the FRN and associated 471 and 470. (If you wanted me to tell you for every applicant in the country, it would take me a while to cook up the right query, but I could do it.) So price transparency would violate the Privacy Policy. They could provide price translucency by rounding pricing off to the nearest $50. Then it would take some detective work to get to PAI, and in some cases I wouldn't be able to say for sure, but in most cases I would be able to say definitively (especially if you give some geographic info), so translucent pricing would still be PAIish.
Price transparency is a laudable goal. But I don't think I21P is the way to get there. At least not the way it's set up now.
1 Sir Francis Bacon, Religious Meditations, Of Heresies, 1597.
For those of you who are thinking it's about time for me to do some grammar woolgathering, I won't disappoint. How does one acronym (or is it "acronate") "Item 21"? I chose to just take the first digit of "21" to form "I2A"; ESH kept the whole number in their "I21P" acronym.
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