FCC Reforms and Modernizes the E-rate

At its July 11 open meeting, the Federal Communications Commission adopted new rules for the universal service Schools and Libraries Program, commonly known as the E-rate Program, which helps ensure that schools and libraries can obtain telecommunications and Internet access at affordable rates. The program was born 18 years ago after passage of the Telecommunications Act of 1996 and the July 11 action by the FCC is the biggest reform of the program in its history. In short, the July 11 action aims to migrate from traditional non-broadband services to focus on external broadband connections and Wi-Fi connectivity to students.

The new rules:

• Significantly expand funding for Wi-Fi networks and distribute it fairly to all schools and libraries while recognizing the needs of the nation’s rural and poorest school districts,
• Maximize the cost-effectiveness of E-rate spending through greater pricing transparency, encouraging consortia and bulk purchasing, and better enforcement of existing rules, and
• Streamline and simplify the E-rate application process and overall program administration.

The new E-rate rules will be in place in time to support $2 billion in Wi-Fi upgrades across the country beginning in the 2015-2016 school year. The FCC said the cost of the program would be covered by unused funds and administrative cost-cutting. After internal discussion, the agency decided to continue to prioritize requests for Internet access to schools over requests for Wi-Fi.

Although with the help of the E-rate program virtually all schools and libraries are connected to the Internet, three out of five schools in America lack the Wi-Fi needed to deploy 21st Century educational tools. And half of school buildings have older, slower internal wiring that won’t carry data at today’s broadband speeds. To close this “Wi-Fi Gap”, the FCC order:

• Sets an annual funding target of $1 billion for Wi-Fi while ensuring support continues to be available for broadband connectivity to schools and libraries.
• Directs at least $1 billion in support for Wi-Fi for Funding Years 2015 and 2016 to connect over 10 million students and thousands of libraries each year by establishing reasonable budgets for applicants.
• Allows support for Wi-Fi purchased as a managed service and caching servers through the new internal connections funding mechanism
• Increases support targeted for Wi-Fi in rural school districts substantially – a nearly 75 percent increase; and targets a nearly 60 percent increase in urban and suburban districts.
• Begins a multi-year transition of all program funding to broadband, by gradually phasing down support for non-broadband services.
• Adopts clear broadband goals to measure overall program success, while maintaining local flexibility to determine the needs of individual schools and libraries.

The FCC voted to maintain the E-rate’s current budget of $2.4 billion (adjusted by inflation) and makes available an additional $2 billion to support Wi-Fi over the next two years through improved financial management practices that free up excess reserves. For the following three years, the program will target $1 billion annually to Wi-Fi -- while continuing to ensure funding is available for broadband connectivity to schools and libraries -- by phasing out support for non-broadband services, such as pagers and phones, and through increased efficiencies.

In total, the program improvements will target an additional $5 billion for Wi-Fi over the next five years, which is sufficient to expand Wi-Fi networks in all schools and libraries. The effort will potentially provide a 75 percent increase in Wi-Fi funding for rural schools over the next five years and a 60 percent increase for urban schools, delivering Wi-Fi to an additional 10 million students in 2015 alone.

New digital learning technologies combined with broadband open new opportunities for students, teachers and library patrons:

• In schools, emerging educational technology allows an increasingly interactive and individualized learning environment and expands school boundaries through distance learning applications.
• In libraries, high-speed broadband access provides patrons the ability to apply for jobs; interact with federal, state, local, and Tribal government agencies; engage in life-long learning; and stay in touch with friends and family.
• The plummeting costs of tablets and netbooks, increasing Wi-Fi speeds, and innovative cloud-based software are allowing this technological transformation of learning, much of which would have been impossible five years ago.

U.S. Secretary of Education Arne Duncan said, "Today's action by the Federal Communications Commission to update the E-rate program is an important milestone on the path toward realizing President Obama's ConnectED vision. Because of this vote, an additional $2 billion will be made available to provide 20 million more students with high-speed Wi-Fi in their classrooms and libraries over the next two years. We commend the FCC on this key vote and for its continued commitment to increasing vital school and library Internet connectivity, which we believe will help more students get a great education, train them for the jobs of the future and continue to build a more competitive U.S. economy. While more work will be needed to meet the President's goal of connecting 99 percent of students in their classrooms and libraries over the next four years, today's vote is a major step forward." In June 2013, President Barack Obama called for the FCC to reform the E-rate and bring next-gen broadband and Wi-Fi to 99 percent of students over the next five years.

FCC Commissioner Jessica Rosenworcel not only wanted to see more money allocated to Wi-Fi within E-Rate, but also for E-Rate to receive greater annual funding overall. The program is currently capped at roughly $2.4 billion a year -- which is little changed from when the E-Rate program was created in the mid-1990s -- but according to the FCC, demand for E-Rate funds is about double that figure. "We can’t expect to compete if we educate the next generation with a support system frozen in the age of dial-up," said Commissioner Rosenworcel.

But FCC Chairman Tom Wheeler said, “It would be a mistake to simply add money to a program that was set in the 20th century.” “No responsible business would stick with an IT plan developed in 1998," said Chairman Wheeler. "We owe the same rigorous self-examination to our schools and libraries." The FCC vote July 11 does mean that the Commission will begin a process to phase out some subsidies for services and equipment that are on the decline, such as pagers and dial-up Internet service. The savings from the phase-out will be focused on broadband and Wi-Fi connections. Republicans – led by FCC Commissioners Ajit Pai and Michael O’Rielly -- warn that the agency will need to increase fees on U.S. long distance phone bills to pay for the spending in the new plan.

Education groups were split on the FCC action. The National Education Association condemned it http://www.nea.org/home/59434.htm for basing funding on number of pupils, which would limit funds for small rural schools. The State Educational Technology Directors Association called it a "pragmatic first step" that shifted resources towards new technology. The American Library Association also praised it for immediately putting money towards Wi-Fi, but it said the FCC must continue to focus on improving broadband speed overall. The Benton Foundation's Amina Fazlullah said the FCC "delivered a huge victory for America’s students and communities."

Senate Commerce Committee Chairman Jay Rockefeller, who was instrumental in creating E-rate in 1996, said, “The E-Rate program remains one of the true success stories of the 1996 Telecommunications Act. It has a proven track record of connecting our poor and rural schools and libraries, and more importantly, for radically transforming the educational experience for a generation of our Nation’s school children. Today, the FCC took initial steps to update this highly successful program for the next generation – and for those yet to come. For more than a year, I have pushed the FCC to secure E-Rate’s future. Although I have not seen the actual text of today’s item, I appreciate that the FCC has heard many of my concerns and the concerns of those on the front lines of the E-Rate program. By making modifications to address these concerns, today’s action is a positive step forward in modernizing E-Rate. 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. I will do my part, and I call on the Nation’s teachers, librarians and all those who truly care about the future of our children to do the same.”

Sen John Thune (R-SD), Ranking Member of the Senate Commerce Committee, said, “Since Chairman Wheeler first announced his $5 billion Wi-Fi stimulus proposal, I have been concerned that he cannot realistically expect to pay for it without forcing Americans to pay more for communications services or diverting E-Rate funds that support necessary connectivity in our nation’s schools, particularly in rural areas. While I disagree with some of my Democrat colleagues who believe the FCC should simply increase the existing cap on E-Rate funding, they are correct that Wi-Fi’s ‘impact cannot be felt where there is no broadband to support it.’ I also share the National Education Association’s opposition to raiding Priority I E-Rate funds to support Wi-Fi. Chairman Wheeler should focus the FCC’s E-Rate reforms on protecting the program’s core mission of connectivity, realizing honest savings, and deploying real dollars, rather than promising future spending that could undermine E-Rate’s effectiveness or increase the economic burden on American ratepayers. There is widespread agreement that E-Rate should be modernized for the broadband era. If Chairman Wheeler is unable to move forward with reforms that have the bipartisan support of his FCC colleagues, he should postpone Friday’s scheduled vote and work to achieve such an outcome later this summer. Moving forward in a partisan manner, relying on untested budget assumptions, and shifting E-Rate’s priority from connectivity to Wi-Fi will only erode the Chairman’s and FCC’s stature, and potentially jeopardize support for E-Rate.”

Sen Ed Markey (D-MA) said, “Today’s decision by the FCC is an important step forward in making the already successful E-Rate program more efficient and effective in providing advanced Internet access for all students, teachers, library users, and librarians in Massachusetts and around the country. The FCC has addressed some of my concerns and correctly recognized that, while the need to promote Wi-Fi in all schools and libraries is more important than ever, it should not come at the expense of bringing broadband to the brick and mortar building itself. To truly ensure our students and the public can best compete in our interconnected 21st century economy, the FCC must still take action to increase the program’s permanent funding cap. I also commend the FCC for reversing its previous determination to exempt video clips from the IP closed captioning rules. Today’s decision correctly recognizes that consumers should have access to critical areas of programming regardless of whether the video is a short clip or a full-length program. The FCC’s actions will better ensure that millions of Americans who are deaf and hard of hearing are not shut out from important online programming.” Sen Markey was the House author of the E-Rate program.

House Communications and Technology Subcommittee Chairman Greg Walden (R-OR) and Vice Chairman Bob Latta (R-OH) expressed dismay with the FCC process of reaching a decision. “The chairman did not need to do it this way. Deliberations at the FCC need to include all commissioners. Period.” said Chairman Walden. “When commissioners don’t receive drafts of proposals until shortly before the vote, there has been a colossal breakdown of process, collegiality, and trust that should characterize the work of the commission. If Chairman Wheeler’s intent is to keep his fellow commissioners in the dark and uninformed – then job well done. But for the sake of sound policymaking, public confidence and good process, commissioners should have ample time and ability to thoughtfully consider items before voting on them.” “Today’s item on improving the Universal Service Fund schools and libraries program could have been a bipartisan success story – bringing 21st century educational tools to the students that need them to thrive,” said Rep Latta. “Unfortunately, Chairman Wheeler’s ‘my way or the highway’ approach to working with his fellow commissioners has resulted in a partisan outcome that will ultimately place new costs on American consumers. The American people deserve better.”

“Today, the FCC expanded on the promise of 21st century digital education by approving a new plan that takes E-Rate into the future," said Rep Anna Eshoo (D-CA). "The Commission’s plan smartly increases the presence of Wi-Fi in classrooms to meet a skyrocketing need for not just connectivity, but also widespread access. Students and teachers will be able to optimize their school’s Internet connection by simultaneously connecting to the Internet on a laptop, tablet or other mobile devices."

The FCC action also launched what is called a Further Notice of Proposed Rulemaking (FNPRM) in which it will consider additional reforms in the E-rate program. The FNPRM has not yet been released but the FCC indicated it will seek public comment on:

• Long-term program funding needs necessary to meet goals and funding targets established in the Order,
• Further steps to facilitate the use of cost-effective consortium-based purchasing, and
• Alternative methodologies for allocating support for library Wi-Fi connectivity.

So the E-rate debate is far from over. You can follow along with us as we track all the news, events and FCC filings as the reform continues. And, in the meantime, we’ll see you in the Headlines.