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eRate disaggregates community buying power
Submitted by acohill on Fri, 10/08/2004 - 09:51.
The papers have been full of stories this week about the suspension of eRate payments to schools and libraries. The FCC suspended the program because of chronic abuses by some recipients of the payments. That aside, let me point out some structural shortcomings of the effort.
- Any time some companies have to become the tax collector for the Federal government and others don't, you've created a structural and competitive inequity. Erate does exactly that.
- Erate really keeps phone bills higher than they would be otherwise, and essentially increases costs for everyone. It would be interesting to do an analysis of what a typical community pays into eRate and actually gets back in eRate payments. What if it turns out most communities pay more in than they get back? Now, one can make an argument that needy communities get more help than they would otherwise. But see my next point.
- Erate payments disaggregate the ability of the community to pool their broadband demand and negotiate lower prices. Erate takes broadband anchor tenants out of the buying pool, thereby forcing other nonprofits and businesses in the community to pay more than they would otherwise. Again, what we need are some studies that look at how much broadband is being purchased by a community in total and the potential cost savings that could be gained by communitywide broadband aggregation (note: this is an activity that should be part of a technology master plan).
- The higher cost of broadband due to disaggregation puts businesses in the community at an economic disadvantage, and affects local tax payments and the ability of those companies to grow and expand job opportunities.
- Erate delays the inevitable, which is what do the eRate institutions do when eRate goes away? Erate will go away because it is a tax on legacy phone service. Legacy phone service is dead, dead, dead. I can have a voice conversation today without using ANY kind of phone company--I don't even need a VoIP service if my calling party has compatible software.
Erate has no future, and schools and libraries are naive in not making plans to move on. A better strategy for schools and libraries would be sit down with all the broadband users in the community and pool their buying power, make some modest community investments in infrastructure, and take control of the economic future of the community, rather than hoping the "free" money continues (and it won't). Erate was a great success--it helped get schools and libraries online. But it is structurally doomed--this has nothing to do with political philosophies or which party you belong to. It just won't work going forward.
max
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eRate disaggregates community buying power
Andrew, while I disagree fundamentally with your point of
view on eRate, I agree that plans need to be made by rural communities for its
demise.
are several types of taxes available for fund raising. Three major types of taxes include property
and income taxes, which tend to tax the wealthy and utility taxes which
tend to tax everyone fairly.
The Universal Service fund is a utility tax. So you have to say everyone is
taxed fairly and the money is dispersed with a free lunch based multiplier,
so the poor end up with more of the money. The companies that collect eRate
are Public Service Companies.
These companies have the right of imminent domain. This means that if they want to
build a big 500 pair copper telephone line through the middle of your
mountain-view or farm, they can.
With that right comes a responsibility of which, collecting this
tax is one. The companies are
not disadvantaged because of eRate, but because as you say, legacy analog
phone service is dead, dead, dead and they refuse to change.
this point I make the argument that the needy get help as you do. It must be remembered that the
Universal Service Fund is responsible for getting electricity and analog
telephone to rural communities.
Now it is responsible for broadband to rural communities. Is it a temporary help? Yes!
does not prevent aggregation of Telco services, it prevents unregulated
aggregation. In any case if
you are depending on aggregation of legacy telephone services to reduce
costs you are wasting your time.
The answer is to use eRate, while it lasts, to build a next
generation network that not only aggregates existing Telco services, but
supports tomorrow’s services.
This is what the LENOWISCO Rural Area Network does with its
innovative switched Ethernet fiber network. This network not only does
everything the existing Telco networks do, but supports the new industry
of Internet TV, VoIP, HDTV, etc.
The initial cash flow, as the benefits of these new services are
realized by the public, is eRate based. The LENOWISCO network is community
owned and will provide the economical telecommunications services that
will be needed after eRate disappears.
a regulated aggregator is not a big problem; hence disaggregation is not a
problem. Studying the economic
impact of this issue is a waste of time, as aggregation of legacy services
is an ineffective Band-Aid to broadband similar to DSL.
last point and summary I agree with whole heartedly. Let’s leverage what’s
left of eRate to build an affordable next generation network for our
communities!
eRate disaggregates community buying power
I am sorry Andrew, I meant to sign the above comment. Paul Elswick, Sunset Digital Communications. We are the operator of the Lenowisco Rural Area Network. pelswick@cornerpost.net