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FCC Will Vote to Modernize E-Rate Program this Fall, Wheeler Says

Wednesday, March 19, 2014

By Bryce Baschuk  

The Federal Communications Commission will seek to discontinue E-Rate funding for legacy technologies, like pagers, in its forthcoming E-Rate modernization order this fall, Chairman Tom Wheeler said.

The agency will vote on a new set of rules before students return to school in September that will change the structure of the program for the 2015 school year, Wheeler said in a March 17 speech delivered at a conference of the Council of Chief State School Officers.

Wheeler did not advocate an immediate increase in universal service fund (USF) contributions for E-Rate modernization but said he “will not hesitate” to seek an increase if the FCC finds more money is needed in the future. The 1996 Telecommunications Act directed U.S. telecommunications providers to contribute to the USF in the form of fees that would subsidize the deployment of broadband infrastructure to American schools and libraries through the E-Rate program.

Wheeler said he soon plans to announce a special task force to examine how the government funds broadband deployment through the USF. Specifically, the task force will examine whether USF recipients are adhering to the rules of the program.

Feather Ruffling

Wheeler said the agency's effort likely will “ruffle feathers” for some current E-Rate subsidy recipients “because it means potentially reallocating E-Rate resources.”

The commission will first seek to eliminate funding for outdated technologies like pagers and traditional copper telephone networks and even some mobile phone subsidies, he said. The commission will then reallocate those dollars towards funding high-speed broadband deployment and greater Wi-Fi access in schools and libraries, he said.

“Our schools, libraries and our E-Rate program all need to evolve from Alexander Graham Bell's technology to Internet protocol technology,” Wheeler said. Wheeler added that the transition “can't be cold turkey” and should occur over time as schools gradually retire legacy systems in favor of modern communications.

No Rate Hike, Yet

The FCC has a fiduciary responsibility “to first assure that every E-Rate dollar is finding its highest and best use,” Wheeler said. “Simply sending more money to the E-Rate program to keep doing businesses as it has been doing for the past 18 years is not sustainable.”

The commission recently announced that it would reallocate $2 billion worth of existing, unused E-Rate funds to subsidize greater broadband capacity for U.S. schools and libraries. Last year, Gene Sperling, the director of the National Economic Council, suggested that wireless and wireline consumers should pay an increased universal service fee of “less than $5 a year for three years” in order to fund greater E-Rate spending.

Republicans in Congress and at the FCC have urged Wheeler to seek fiscal restraint on any effort to further expand the E-Rate program. The top Republicans on the House and Senate Commerce committees noted that the USF contribution factor has increased from 9.5 percent from Q1 of 2009 to 16.4 percent in Q1 of 2014, according to a Jan. 30 letter..

Actionable Items

FCC Commissioner Jessica Rosenworcel said during a separate speech at the event that the agency needs to collect better data from E-Rate applicants about their broadband Internet capacity and needs. The commission can simplify the application process for schools by converting them to multi-year applications, incentivizing schools to apply via consortium and making the application process more transparent, she said.

Rosenworcel said the FCC can further expand the program's funding cap by adjusting for the inflation that has occurred since the program's $2.25 billion cap was implemented in 1998. The FCC's 2013 E-Rate funding cap was $2.38 billion. The Commission began indexing the annual funding cap to inflation in 2010.

To contact the reporter on this story: Bryce Baschuk in Washington at bbaschuk@bna.com

To contact the editor responsible for this story: Heather Rothman at hrothman@bna.com

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