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Funding Year 2011: Bringing out the Crystal Ball

This is the time of year when I get asked by many E-rate stakeholders if I can predict where the final Priority Two (Internal Connections and Basic Maintenance) funding threshold may land. According to the SLD’s Funding Year 2011 Demand Estimate, $4.31 billion was requested, which is up 10 percent from $3.92 billion in FY2010.

But before forecasting where the Priority Two threshold will fall, let’s take a closer look at the numbers:

The first data point we need to review is the FY2011 demand for Priority One Services (Telecommunications and Internet Access) which is $2.173 billion.

Next, the estimated demand for Priority Two funding at the 90% discount level is $1.008 billion which, if this were the end of the story, would still leave only a very small percentage of the 90% applicants any Priority Two dollars.

However, we should remind ourselves that because of the Sixth Report & Order, the FCC will use the gross domestic product chain-type price index (GDP-CPI) to inflation-adjust the amount of funds available annually to E-rate program participants. In FY2011, the SLD can disburse $2.27 billion.

But let’s dig even deeper into the numbers:

  • The SLD announced at the USAC Schools and Libraries Committee Quarterly Meeting on April 26, 2011 that they have approximately $600 million from previous years that are available for rollover for FY2011;
  • On average, since FY 2007, $147.5 million has been denied each year for Priority One services;
  • Not all Priority Two 90 percent applicants will get funded because of various compliance issues. From FY2007-2009 on average $185 million was denied at the 90 percent level for Priority Two applications;
  • Since 2007, the SLD has reduced annually the funding request amount on average by $61 million each year;
  • The last time the FCC rolled over $600 million was in FY2008 and the FY2008 Priority Two threshold reached 87 percent, however, in FY2008 less was requested at the 90 percent level for Priority Two Services than FY2011.


By reading these tea leaves and understanding the historical data discussed, it would seem likely that the Priority Two requests at the 90 percent level would be able to receive full support and it could conceivably get a little lower if the SLD ends up denying more applications this year due to confusion among stakeholders with the new rules and guidance that was released based on the Sixth Report & Order.

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