Figure 1
Figure 1 is a map of California overlaid with all of the K12HSN program’s network sites, as well as the school district sites connected to the network. The map also depicts the K12HSN connections between network sites and the CENIC connections between backbone hub sites. The K12HSN program is responsible for all costs associated with overseeing connections to the backbone for all 86 network sites. The network sites are usually county offices of education. The backbone is operated by CENIC and leased to K12HSN. School districts are responsible for their own Internet connections to the network and the associated costs of those connections.
Figure 2
Figure 2 is a flow chart comprised of four stages: Competitive Bidding, Applying for Discounts, Services Start, and Invoicing and Payment. At the competitive bidding stage, CENIC requests services on behalf of K12HSN by submitting a description of services requested to USAC, a non-for-profit corporation designated by the Federal Communications Commission to administer the Universal Service Fund, which funds the E-Rate program. The competitive bidding process must be open for at least 28 days. Afterward, CENIC and ICOE evaluate proposals received and select service providers with whom CENIC signs contracts for services. The next stage involves applying for discounts: CENIC seeks discounts for services by submitting an application for funding to USAC within the filing window. In response, CENIC then receives a Funding Commitment Decision Letter from USAC. The third stage is when CENIC notifies USAC that services have started. The final stage involves invoicing and payment, for which there are two invoicing methods. Invoicing Method Number 1: The service provider reduces the amount charged by the value of the anticipated E-Rate subsidy and only bills CENIC for the non-discounted share of costs. The service provider then invoices and receives reimbursement from USAC for the E-Rate subsidy amount not charged to CENIC. Under this method, the K12HSN program never pays for the discounted portion of services covered by the E-Rate subsidy. Invoicing Method Number 2: The service provider invoices and receives payment from CENIC for the full amount of service costs. CENIC then invoices and receives payment from K12HSN, which accrues the anticipated E-Rate subsidy amount in its financial records. Next, the service provider invoices and receives payment from USAC for the E-Rate subsidy amount previously paid by CENIC. The service provider then reimburses CENIC for the E-Rate subsidy amount paid by USAC. Finally, CENIC deposits the subsidy amount to the K12HSN bank account. Under this method, the K12HSN program pays for services at the time of billing and must wait until the invoicing process is complete before being reimbursed for the E-Rate subsidy.
Figure 3
Figure 3 is a bar graph showing the K12HSN year-end operating reserve grew steadily from $8.7 million in fiscal year 2010-11 to a high of $14.7 million in fiscal year 2014-15 but subsequently decreased in fiscal year 2015-16 to $5.7 million. Specifically, the operating reserve increased to $10.9 million at the end of fiscal year 2011-12, $13.2 million at the end of fiscal year 2012-13, and $14.3 million at the end of fiscal year 2013-14. Because K12HSN received no state funding in fiscal year 2015-16, ICOE used the K12HSN operating reserve to pay for the portion of program expenditures not covered by federal Internet subsidies or other funding sources, thereby reducing the reserve amount by approximately $9 million.
Figure 4
Figure 4 shows 3 bar graphs comparing percentages of cumulative Internet subsidy revenue received by month in each fiscal year. In fiscal years 2013-14 and 2014-15 ICOE received all or nearly all of its Internet subsidy revenue by the end of March. However, in fiscal year 2015-16 ICOE received only 22 percent of its subsidy revenue by the end of March, and 92 percent by the end of the fiscal year. ICOE received the remaining 8 percent in October of the following fiscal year. Specifically, in fiscal year 2013-14 ICOE received 4 percent of its Internet subsidy revenue by the end of September 2013, 20 percent by the end of December 2013, and 100 percent by the end of March 2014. In fiscal year 2014-15 ICOE received 6 percent of its Internet subsidy revenue by the end of September 2014, 35 percent by the end of December 2014, 99 percent by the end of March 2015, and 100 percent by the end of June 2015. In fiscal year 2015-16 ICOE received none of its Internet subsidy revenue by the end of September 2015, 11 percent by the end of December 2015, 22 percent by the end of March 2016, and 92 percent by the end of June 2016. Over this three year period, 96 percent of ICOE’s accrued subsidy revenue was for the federal E-Rate subsidy, and only 4 percent was for the Teleconnect Fund subsidy. Also, this figure addresses only the subsidy revenue owed to ICOE in the form of reimbursements, because the service providers otherwise advance the subsidies and ICOE does not pay for those portions of its Internet services.
Figure 5
Figure 5 is a line graph that illustrates circuit usage for a specific upgrade for the period from January 2015 to March 2017. ICOE plans to upgrade the capacity of this circuit from 10 gigs to 100 gigs rather than doubling or tripling its capacity. However, the circuit’s usage does not warrant the cost associated with ICOE’s chosen upgrade when less expensive options were available. Specifically, ICOE decided to upgrade the circuit’s capacity because its usage rose above 50 percent of its current capacity. The circuit’s historical data shows that the circuit’s usage peaked above 50 percent three times prior to ICOE’s decision in February 2016 to upgrade the circuit. Therefore, it broadly fits within ICOE’s guidelines for initiating capacity upgrades. Specifically, the circuit usage reached a peak of roughly 6 gigs on two occasions and roughly 7 Gigs in one instance. Subsequent to ICOE’s decision, the circuit’s usage peaked no higher than 9 gigs through March 2017. ICOE chose to upgrade the circuit’s capacity to 100 gigs rather than 20 gigs or 30 gigs. The 100-gig upgrade will cost the K12HSN program $84,000 annually, as well as an additional one-time cost of $129,000. In contrast, the 20-gig option had an annual cost of $54,000 without a one-time cost and the 30-gig option had an annual cost of $81,000 without a one-time cost.