How much management does the technology market need? Quite a bit, if you ask the Federal Trade Commission (FTC). It recently announced a new task force that will monitor competition in the US technology market, a goal that seems noble, indeed. But this also assumes that lack of oversight is the cause of tech monopolies. The real reason small business gets crushed in tech and monopolies emerge isn’t the free market—it’s a smothering bureaucracy. And America’s students are missing out because of it.
Bureaucracy Stifles Progress
I was an executive at an education technology startup for over three years, and I saw first-hand how vast government bureaucracy stifles progress.
Let’s take, for example, the Boards of Cooperative Educational Services (BOCES). Bureaucratic barriers make it nearly impossible for small businesses to obtain contracts. Any company that wants to sell its educational products to public schools in New York needs a BOCES contract. Without it, the schools will not get financial aid from BOCES. But for small companies, simply getting a contract with BOCES is a labor-intensive, multi-year undertaking.
Companies are only eligible for a contract if they can obtain “purchase commitments” from two to three schools. But most schools don’t want to deal with companies that don’t have a contract in the first place. To apply for the contract, companies have to wait until there’s a Request for Proposals from BOCES for their specific type of service, which doesn’t even happen every year. For a decision, they generally have to wait for another half-year. These kinds of bureaucratic barriers make it nearly impossible for small businesses to obtain contracts.
Consequences for a Business
So, for any new tech company, BOCES serves as a barrier to entry. Vendors have to seek a contract instead of selling their products to schools and districts directly.
While it’s driving prices down for their constituency, BOCES is prohibiting vendors from offering the same discount to non-participating schools. Services shared by districts end up costing less when purchased through BOCES than if purchased individually. However, BOCES requires a discount from its vendors, meaning that non-participating schools will have to pay more for the same product.
Consequences for Education
BOCES hurts poor schools by creating a barrier that makes it harder to adopt new technology in those districts. Introducing technology into the classroom improves student performance, and since low-income schools have worse education outcomes, it’s critical for them to have access to cutting-edge education technology.
The bureaucracy is deterring new businesses from selling innovative products in New York while giving an unfair advantage to older companies that often carry outdated or obsolete products but have BOCES contracts. With over 130,000 schools in the US and fewer than 5,000 schools in New York, most EdTech companies find it hard to sell their products in the state, so they focus on other states, instead.
Consequences for the Education Market
The economy suffers from this bureaucratic nonsense, too. BOCES picks winners and redistributes education funding from taxpayers to its chosen favorites, which has an adverse effect on economic growth.
Most states have some sort of agency that gets in the way of school technology purchases and sales. Examples of these include BOCES in Colorado, Educational Service Agencies (ESA) in Texas, and a variety of county school boards in Florida, just to name a few.
Barriers like these are creating more ways for established businesses to shut out startups from competing.
Faced with a wide variety of barriers, companies cannot easily apply the same sales process across different school districts—they have to figure out sales strategy in each individual district. As a result, lots of resources are wasted.
This is crushing small businesses and hurting students. Barriers like these are creating more ways for established businesses to shut out startups from competing because large companies have the resources to deal with the bureaucracy of multiple school districts, while small businesses don’t. The lack of competition contributes to the creation of monopolies and the slow adoption of new technologies in education.
A short-term solution for New York would be to provide financial support directly to schools—without BOCES. Schools would have the flexibility to choose what they want to purchase, and this would also allow many more vendors to enter the market.
The overregulation of small business is interfering with the free market—disrupting technological progress to the detriment of students.
Long-term, outdated government agencies like BOCES should be eliminated, opening new possibilities for companies and creating competition that will spur innovation and bring cutting-edge technology to schools. It would also save taxpayers’ the dollars being wasted running agencies like BOCES, instead freeing up money that could be spent at the local school and classroom level to help students.
Instead of wasting resources on investigating Big Tech, the FTC should investigate how much the overregulation of small business is interfering with the free market—disrupting technological progress to the sorry detriment of America’s students.