Wheeler Outlines Proposal To Raise E-Rate Cap

Says It Is Crucial to Competitiveness, Closing Digital Divide

WASHINGTON -- Federal Communications Commission chairman Tom Wheeler this week will circulate a proposal 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.

That adds up to about $1.5 billion. The chairman plans to vote on the item at the Dec. 11 meeting.

The goal is to close the digital divide, Wheeler said. While almost all schools have some broadband access, thanks to the program, Wheeler said 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.

The new table stakes for E-rate in the short term is 100 Megabits per second per 1,000 students, with the long-term goal at 1 Gigabit per second.

"We may be talking about children, but this is not kids' stuff," Wheeler said. He said he made the move to improve the economy, bolster global competitiveness and to succeed in the digital age, which means preparing rich and poor kids to succeed. Without spending on high-speed broadband for schools and libraries, Wheeler said, kids in rural and low income areas will be bypassed.

"We can do better. We will do better," he said.

In announcing the proposal on a conference call with reporters Monday (Nov. 17), Wheeler, joined by E-rate progenitor Sen. Ed Markey (D-Mass.), said that raising the rate was key to closing the rural digital divide in which rural (and urban) and low income schools did not have the same access to high speed broadband as more affluent schools. He said it was understandable given the cost of buildouts, but was unacceptable given the cost to the economy and global competitiveness of lagging in digital-age educational tools for all schools and libraries.

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. Markey pointed out that while the program has been successful in getting connectivity to those schools and libraries -- from a rate of 15% or so back in 1996 to almost universal service today -- the technology raced ahead. It is time to catch up, he said.

Wheeler has made it clear high-speed is the new definition of broadband, and made it clear on Monday's call that that applies to schools and libraries. He also said those facilities should be able to spend the money to build or lease capacity rather than being "held hostage by the actions, or inaction, or local telecom providers."

In a straight party line vote, the FCC back in July took the first steps to reforming the E-rate to refocus it on broadband and speed, rather than simply connectivity. The FCC is migrating the subsidy from traditional non-broadband services and a focus on external broadband connections, to a focus on Wi-Fi connectivity to students.

But the agency collected input on how to raise the cap to boost high-speed connectivity. With that information in hand, Wheeler signaled the FCC was ready to act to take the next step in rebooting the E-rate.

Republicans on the commission and on Capitol Hill have not been high on the idea of raising the cap, or the on July reforms -- Republican commissioners Ajit Pai and Michael O'Rielly both dissented from the July vote, and Pai got ahead of the chairman's announcement with an emailstatement earlier in the day decrying what he called a new 17.2% tax on consumers' phone bills.

"I strongly oppose this 17.2% tax increase," he said. "Instead of imposing a greater burden on families struggling to make ends meet in this lackluster economy, the commission should pursue fiscally responsible reforms. These reforms would cut the bureaucratic red tape and focus resources on the children and library patrons of poor and rural America, where the need is greatest."

Wheeler said on the call that the 16 cent increase (on that 99 cent monthly USF line item on phone bills, which is where Pai gets the percentage increase) is a cap, and that the figure will vary and likely not jump to that cap in the first year. But even at the 16-cent figure, Wheeler said, the increase amounted to the price of one cup of coffee or soda a year.  He also pointed out that since the E-rate program has not been adjusted for inflation in more than 12 years, the increase in the cap was covered mostly by catching up to what that inflation-adjusted number would be. Markey echoed that sentiment.

Asked if consumers wouldcomplain about higher bills, Markey argued that the E-rate program has not been subjected to the criticism leveled at other fees because Americans understand the need to support digital education. The fact that the funding is directed towards the education of every child in America has protected it from the kind of criticism that other programs have incurred, he said.

“The E-Rate program is one of the most successful and consequential technology and education initiatives ever created," said Rockefeller in a statement. "Today, the E-Rate program gives almost every classroom in America access to the Internet fundamentally transforming the educational experience for a generation of our Nation’s school children.

“Today’s announcement puts the goal of securing E Rate’s future within reach with this substantial investment. I thank Chairman Wheeler for his commitment to making sure E-Rate has the resources it needs to meet the growing technology needs of our schools and libraries. I also want to thank Commissioner Rosenworcel for her tireless efforts to modernize E-Rate.”   

A source close to the Senator said he had hoped to join Wheeler and Markey at the announcement--he is the Senate's prime E-rate mover--but it didn't work out from a scheduling standpoint.

Following the announcement of the proposal, Commissioner Michael O'Rielly jioned Pai in criticizing the move. "Initially, the FCC will raise telecommunications bills by at least 16 percent," said O'Rielly in a statement, "and, ultimately, I predict the FCC will disastrously impose new fees on broadband service – a move that even some consumer groups have opposed."