MAXIMIZING THE COST EFFECTIVENESS OF E-RATE FUNDS

A.Increasing Consortium Purchasing

184.At the same time, in funding year 2011, consortium purchasing accounted for only about $300 million of E-rate funds committed by USAC, or about 13 percent of all E-rate funds disbursed.¹ In the recent Healthcare Connect Fund Order the Commission found that bulk purchasing by consortia helped drive down service rates, increase bandwidth, improve service quality and reduce administrative overhead.² We therefore seek comment on whether we should adopt additional incentives or mechanisms to facilitate the use of consortium purchasing in the E-rate program. In particular, we are interested in ways that consortium purchasing can drive down prices and otherwise benefit applicants and the E-rate fund.

185.We also seek comment on whether there are legal, geographic or other barriers preventing certain schools and libraries from taking advantage of consortium purchasing. Are there ways in which our rules prevent or discourage participation by applicants who might otherwise join a consortium? We invite commenters to identify specific amendments we can make to our rules to ensure that applicants can join or form consortia.

186.Are there other actions the Commission can take to remove barriers to participation in consortia? We recognize that not all applicants choose to join a consortium and we therefore ask about the factors that contribute to an applicant’s decision to join or not to join a consortium. In particular, we seek comment from applicants on how they weigh the administrative benefits of joining a consortium in the E-rate program against the burdens the program imposes today. We seek comment on whether there are consortia-friendly application processes that would minimize the administrative burden on applicants and USAC. Should we, for example, prioritize consortium applications in the USAC review process? Should we allow for prioritization for all consortia or only those that, for example, include the neediest schools and libraries? In what ways should we streamline the consortia review process?¹ What steps should we take to avoid disadvantaging schools and libraries unable to participate in consortia, such as some schools and libraries on Tribal lands?

187.We also seek comment on whether particular types of services lend themselves better to consortium purchasing. For example, we note that while schools and libraries might join consortia for broadband access, they might apply independently for internal connections. In particular, we seek comment on whether consortia are effective vehicles for driving down specific costs, such as equipment purchases or broadband access.

188.We seek comment on whether our consortium procedures have different impacts depending on the composition of the consortia. For example, are there disparate impacts between consortia that include only schools, or only libraries, or both schools and libraries? Is the formation of consortia impacted by potential disparities in discount levels? Are consortia that include other entities such as health care providers and/or public sector entities such as state colleges and universities, educational broadcasters, counties, and municipalities impacted in different ways? While we seek comment on these consortia configurations, we also open the inquiry to whether there are other entities that join with schools and/or libraries to create consortia and whether there are specific impacts on those consortia. Given the potential efficiencies of broadband networks that serve multiple types of anchor institutions, are there steps we can take to facilitate the formation of consortia that extend beyond schools and libraries?

189.Finally, while we are eager for schools and libraries to secure the many benefits that consortia can provide, we are mindful that aggregation of applicants can also diminish competition.  We seek comment on whether service providers who would compete to serve some of the entities in a consortium might not bid if they could not serve the entire consortium. As a result, a larger consortium could leave a single bidder facing little pressure to pass on any reduced costs to applicants.  We seek comment on what the Commission might do while encouraging cost-saving consortia so as to minimize, if not avoid, negative effects on competition.