E-Rate Order OK'ed on Party-Line Vote, Contains Guarantees for Broadband

It includes a further NPRM seeking comments about the program’s long-term funding needs, though Republican commissioners saw it as a precursor to a proposal coming after the November elections to raise E-rate’s $2.4 billion cap. Commissioner Jessica Rosenworcel, a key vote given the opposition of both Republicans to the order, had publicly called for a funding increase. The order also contains what FCC Managing Director Jon Wilkins described as a “safety net,” guaranteeing that funding for external broadband connections will not be affected. Rockefeller in a statement continued to express concern that E-rate is underfunded.

FCC Republicans complained they were left out of the process (CD July 9 p1). Commissioner Ajit Pai said he did not see the order until 10:13 a.m. Friday, minutes before the 10:30 a.m. meeting. Commissioner Mike O'Rielly said he was told his suggestions were rejected late Thursday night.

Rosenworcel called the order a “start” and a “first step,” though it was a “terrific start.” E-rate had lost about $1 billion in purchasing power over the past 16 years, said Rosenworcel, calling for raising the cap. She was voting for the order although “I would have preferred to fix this gap here and now, instead of leaving it for a” FNPRM, Rosenworcel said. “I hope that going forward we will have the courage to fix this. I hope going forward we will be bold. Because this is not just a matter of getting schools and libraries connected -- it’s a matter of our global competitiveness."

The promise that a cap increase would be taken up through the NPRM was likely important in securing Rosenworcel’s vote, an education lobbyist said. Wheeler, who observers said preferred not moving ahead with a cap increase now, said that in issuing the NPRM over funding, the commission was taking a “step-wise, logical, business-like decision-making process” that will result in a “logical, fact-based decision.” The delay in taking on the cap question was blasted by Republicans (see separate report below in this issue), as being calculated to come after the elections. “Mark my words … in five months, maybe six, we'll be back at this table discussing how much to increase Americans’ phone bills,” said Pai. “Universal service contribution rates have jumped 60 percent under this administration. What’s a few billion dollars more?”

'Not Perfect’

The order “certainly is not perfect, and there are key aspects I would have approached differently,” said Commissioner Mignon Clyburn, as she voted for it. Clyburn has not taken a position on raising the cap, but said “only 20 percent of our nation’s libraries have fiber. … I certainly believe that more than 20 percent of our libraries are in need of such capacity. The number of schools that have fiber is significantly higher, but I am afraid even those numbers are not ideal."

Rosenworcel and Clyburn nonetheless praised the order as a step toward improving education for children. Wheeler said the order will connect more than 10 million students next year -- “a good day of work.” The plan moves ahead with Wheeler’s push to address the Wi-Fi gap. Until Friday’s order, external connections were prioritized for funding. As a result, Wi-Fi connections last year received “nothing, nada, zero,” Wheeler said.

Wi-Fi will receive $1 billion in each of the next two years, from $2 billion in unspent funds, Wilkins said. Within five years, the agency will phase out, or in some cases, eliminate funding for voice and other services, which will be spent on Wi-Fi. The savings is projected to produce $350 million the first year and $600 million the second year -- the years in which Wi-Fi would be funded with the money in reserve. The savings are expected to rise to $800 million in the third year, $900 million the fourth year and $950 million the fifth year. The remaining amount to meet the $1 billion threshold is expected to be made up through a number of efficiencies, Wilkins said. Pai has disputed those numbers and predicted a shortfall. If there’s a shortfall, the money would not come from connections to schools and libraries, Wilkins said.

Educational, Library Backing

Education and library organizations, many of which expressed concerns (CD June 30 p10) about the draft order, were largely supportive of the vote. “We still want a cap increase,” said Mary Kusler, National Education Association director-government relations. The group had yet to study the order, but Kusler was encouraged the order protects funding for connections to schools, which she said is needed for Wi-Fi to operate. The group remains concerned about changes in the program, in which the amount of funding for internal connections will be capped at $150 per student for schools and at $2.30 per square foot for libraries. Kusler is concerned the funding will not be enough.

It’s “a solid first step toward increasing library participation in the E-rate program and moving our communities toward the gigabit speeds increasingly needed to support Wi-Fi, digital learning and multimedia collections,” said American Library Association President Courtney Young in a statement. The Urban Libraries Council called the action “an important first step in reforming E-rate.” Ex-FCC Chairman Reed Hundt, who represents the ULC, said more funding was needed. ULC had advocated libraries be funded at $4 per square foot.

The order has reforms, including streamlining the process for multiyear applications, speeding review of the applications and moving to electronic filing of all documents, Wilkins said. The order does “very little” to streamline the process, said Pai, who believes the process discourages small rural schools from applying because of staffing. “The FCC has forfeited this opportunity for real, bipartisan reform of the E-rate program,” said Pai, who called the order “just 158 pages endorsing more of the same."

On Capitol Hill, Democrats demanded the FCC continue to overhaul the program by focusing on funding, while some House Republicans blasted the agency’s process. Rockefeller and Sen. Ed Markey, D-Mass., praised Wheeler for taking into account some recommendations the two made in a critical letter sent to the agency Tuesday. But both said more action is needed. “Now it’s time for the FCC to roll up its sleeves and work to address the real pressing need -- providing much-needed additional long-term funding for this important program,” Rockefeller said. The agency “must still take action to increase the program’s permanent funding cap,” Markey said.

"We cannot close the books on E-Rate reform with just today’s action,” said House Communications Subcommittee ranking member Anna Eshoo, D-Calif. “Equally important is adequate funding for E-Rate.” Its “purchasing power must meet the growing costs of Internet connectivity and access,” she said. Rep. Doris Matsui, D-Calif., called the vote “an important step in this direction” toward 21st-century learning. ,