Divided FCC Votes To Expand E-Rate

Raises cap by $1.5 billion; Republicans Slam Decision

Amidst protestors over Title II, a politically divided FCC voted 3-2 (Republicans strongly dissenting) to approve an expansion of the FCC's E-rate program, which subsidizes advanced telecommunications for schools and libraries, including to raise the cap on E-rate subsidies by up to 16 cents per phone line—the current tax on consumer phone bills is 99 cents per month for all Universal Service programs, the chairman said in announcing the proposal.

In addition to the protestors, also speaking out were witnesses from schools and libraries who said the expansion was crucial to learning in the digital age.

The E-rate (or education rate) is the Universal Service Fund subsidy on consumer phone bills that goes to getting advanced telecommunications to schools and libraries.

The FCC voted to increase the cap on E-rate funding by $1.5 billion to $3.9 billion, with inflation escalations as well. Republicans called it an ill-targeted spending spree. Democrats called it the launch of a necessary digital upgrade for the nation's school kids, and Chairman Tom Wheeler called it a moral imperative.

It item also provides more payment flexibility for nonrecurring construction costs, allows for self-construction of last mile facilities when that is the most cost-effective, adjusts the per-square-foot calculation for funding expands the definition of "rural" area eligibility to 25,0000 people or less and dismissed various challenges to the proposed new rules.

The chairman outlined the proposal last month (http://www.multichannel.com/news/fcc/wheeler-outlines-proposal-raise-e-r...), saying that while almost all schools have some broadband access, that basic service not longer cuts it in the digital age. He also pointed to the disparity between schools in low-income and higher-income neighborhoods and said that had to be fixed.

Commissioner Mignon Clyburn praised the move and the chairman's willingness to up the per-square-foot subsidy to help urban schools and libraries.

Commissioner Jessica Rosenworcel, who has long championed E-rate expansion, said it is time to wind down analog-era education. "Change does not stop at the school door," she said.

Gas was a dollar a gallon when the E-rate funding cap was established. She said the E-rate funding had not kept pace, and the item "rights that wrong." She said there is no reason for other nations to outspend, out-educate or out-achieve the U.S.

Rosenworcel called the item the launch of what she calls E-rate 2.0, but that more needed to be done to get high-speed access to kids at home. She put in a plug for allowing the Universal Service Fund Lifeline funding to be migrated from phone service to broadband to close that "homework gap." A phone is not how you want to research a paper or apply for a job," she said.

Wheeler pointed out that there were at least three votes for such Lifeline program reform.

There were not five votes for the E-rate expansion.

FCC Commissioner Ajit Pai called the increased spending proposal "wasteful and crazy." He said he thought the E-rate program was worth fighting for, just not this version of it.

He pointed out that he had predicted earlier in the year that the FCC would boost the E-rate fund in December, and he was looking prescient.

But he was not happily so. Pai called it a tax-and-spend scheme that was nickeling and diming folks who could not afford the increase. He said the increase could go to 20% next year, a tax on phone bills each month.

He also criticized allowing entities to build their own networks, saying that could lead to overbuilding existing service.

He said that much of the additional money would pay for a two-year WiFi pilot program, which the FCC had said would only cost $2 billion.

Now, he said, that pilot may cost as much as $3 billion in its first year alone. He gave the FCC an "F' in math.

Pai said rather than focusing the money on poor schools in rural towns, it gives a special interest giveaway to well-funded urban areas. He said it is clear the FCC has given up any pretense of safeguarding funds entrusted to it in favor of what his fellow commissioner, Michael O'Rielly calls an E-rate spending spree.

Pai said he thought the E-rate program is worth fighting for, but not this version of it. He said the FCC had failed to deliver "real reform," but instead simply pours money into a broken system and furthers a bureaucracy that would make the IRS look efficient.

Commissioner O'Rielly also took aim at the item. He said he was concerned that the increase in funding is not offset elsewhere in the program. He also said he was troubled by the lack of targeting of the funding, and like Pai was concerned by the self-provisioning that could lead to overbuilding.

Wheeler said he was aghast at the hostility expressed to giving kids 21st century education tools. He said the bottom line was that it was a moral issue. The greatest moral responsibility that any generation has is the preparation of the next generation. He said that 16 cents a month, less than the cost of a McDonalds' soda over the course of a year, is a small price to pay for that "great responsibility that we all have."

Wheeler added that two-thirds of American schools, or about 40 million students, don’t currently have connections sufficient to support “modern digital learning. “ That, he said, is an “F.” Wheeler pointed out that he had spent the previous decade in the private sector as an investor. "This is the most significant investment I have made in my professional life," he said.