Universal Service Fund

While the Lifeline program was a crucial step toward providing low-income Americans with internet access, it’s also become the target of uproarious criticism. The reason? A Government Accountability Office (GAO) study recently reported waste and fraud in Lifeline, and the immense backlash even prompted two Congressional hearings on the matter, both of which largely served as opportunities for senators to publicly tear into the program for alleged “waste, fraud, and abuse.”

Thing is, these claims are based on outdated data, given that the Federal Communications Commission has implemented several significant and targeted reforms to root out fraud in the time since the agency collected its data. Weakening the Lifeline program poises the vicious cycle of wealth and opportunity disparity to be passed onto the next generation—and potentially beyond. We shouldn’t allow that to happen.

With this Public Notice the Wireline Competition Bureau seeks comment on the sufficiency of budgets for category two services under the E-rate program (more formally known as the schools and libraries universal service support program). In the E-rate Modernization Orders, the Commission adopted five-year, pre-discount budgets for schools and libraries. When the Commission adopted these rules in 2014, it established a five-year test period to allow the Commission to determine whether the applicant budgets were effective in ensuring greater access to E-rate funding for internal connections. The Commission directed the Bureau to report on the sufficiency of these applicant budgets before the filing window for funding year 2019 opens. In particular, the Commission directed the Bureau to use FCC Form 471 data from funding years 2015 through 2018 to analyze trends across different types of applicants or regions in the nation, particularly schools that serve students with special education services.

In preparation for this report, we seek comment on the sufficiency of the category two budgets. Specifically, we seek comment from applicants, service providers, and other interested parties about how applicants have used their budgets and the percentage of category two services purchased by applicants that were or will be covered by the budget. Interested parties may file comments on or before October 23, 2017 and reply comments on or before November 7, 2017. Comments and reply comments should reference WC Docket No. 13-184.

It's hard to run a successful business without access to high speed broadband. That was the message that repeatedly surfaced as Senate Democrats discussed issues important to rural America during a rural summit on Sept. 13.

Sen Tammy Baldwin (D-WI) joined senators from Montana, Delaware. North Carolina, Minnesota, Michigan and other states, along with national leaders, to discuss issues important to rural America, with an emphasis on boosting economic opportunity. Representing Wisconsin, Sen Baldwin was joined by Wisconsin Farmers Union President Darin Von Ruden and James Wessing, president of Kondex Corporation in Lomira.

In describing the importance of rural communities, Senator Amy Klobuchar (D-MN) pointed out that about 60 million Americans live in rural areas, which is equivalent to 20 percent of the US population. However, the other 80 percent of the nation's population relies on that 20 percent for their food, energy and "so much of what they need to survive day to day."

There’s no question that high-speed Internet is a game-changer for rural Americans. It’s improving standards of living more than any new technology since the rural electrification effort in the early 20th century. That is—so long as you have access. And that’s the big challenge.

Rural Americans too often find themselves on the wrong side of the digital divide. In rural America, 28% of households lack access to high-speed, fixed service. In urban areas, only 2% go without. Rural Americans are missing out on opportunities for jobs, health care, education, and more, and there’s a significant cost to those lost opportunities. But I worry that we’re losing something even greater if rural communities remain stuck in the analog age. That’s the slow fade of rural communities themselves. To be clear, I’m not saying that the digital divide is the reason why rural communities are shrinking. This trend started before the commercial Internet even existed. What I am saying is that how we deal with the digital divide will affect the destiny of towns like Parsons and Ulysses and Beloit and Hiawatha. It’ll help determine if this population loss gets faster, slows down, or is potentially reversed. Broadband-enabled opportunities for jobs, education, health care, and agriculture can be a great equalizer for rural America. But so long as some rural communities don’t have broadband, they’ll fall further and further behind.

To spur network deployment in sparsely populated areas where the economic incentives for private investment don’t exist, the FCC is providing direct funding that leverages—not displaces—private capital expenditures. But we also want to modernize our regulations to give companies a stronger business case to build and expand high-speed networks. The plain truth is that bureaucratic red tape at all levels of government can slow the pace and increase the cost of network deployment.

Organizations representing broadband providers have asked the Federal Communications Commission to modify its proposal for the Connect America Fund (CAF II) Auction. The CAF II auction will award funding rejected by price cap carriers in parts of 20 states. The auction is designed to award funding to the provider that offers to deploy service at the lowest level of support. In comments filed with the FCC, one broadband provider organization expressed concern that the proposed auction design could prevent the full amount of available funding from being awarded, while another argued against package bidding. At least two comment filings argued that measures aimed at preventing collusion were too harsh and could deter small broadband providers from participating.

In 2013, only 4 million students had access to broadband that provided internet fast enough to allow for digital learning in the classroom. Now, four years later, that number has catapulted to 39.2 million, thanks to the modernization of a federal program and a broad bipartisan coalition of federal and state lawmakers and policymakers dedicated to the cause.

"America made a historic promise to our students in 2013 to connect every school district to high-speed internet," said Evan Marwell, CEO of EducationSuperHighway. "We've made great progress since then,” he said. “However, our work is far from over. It is critical that federal and state leaders, schools, and service providers continue the hard work necessary to close the connectivity gap." But that gap now spans just 6.5 million students and it’s expected to be eliminated by 2020 based on current growth models. Under the Obama administration, in 2014, the Federal Communications Commission voted to modernize its E-Rate program, which provides funding for schools and libraries to connect to the Internet. The commission approved a $1.5 billion boost in funding and set new standards in an effort to expand access, including setting minimum recommended bandwidth levels, requiring fiber connections to every school in order to allow bandwidth to grow over time, and setting up wireless connections in every classroom to support “one-device-per-student” programs.

On July 17, 2017, Senate Commerce Committee Chairman John Thune (R-SD) sent Federal Communications Commission Chairman Ajit Pai a letter with five questions about Universal Service Fund collections and disbursements and “a description of any regulations limiting allocation of undisbursed USF funds to a particular program or use.” On Sept 5, Chairman Pai replied.

More than 39 million students in America now have access to high-speed Internet at school, a 5.1 million student increase over last year. This research shows that 94 percent of school districts nationwide now meet the minimum 100 kilobits per second (kbps) per student goal set by the Federal Communications Commission in 2014. The report confirms that America continues to make extraordinary progress in narrowing the K-12 digital divide. Overall, 39.2 million students, 2.6 million teachers, and 74,000 schools are now achieving the minimum connectivity goal that gives students equal access to digital learning opportunities. However, 6.5 million students are on the other side of the digital divide without access to high-speed Internet. A divide that is particularly wide in the 1,587 rural K-12 schools that don’t yet have the infrastructure necessary to revolutionize the way teachers teach and students learn.

“America made a historic promise to our students in 2013 to connect every school district to high-speed Internet,” said Evan Marwell, CEO of EducationSuperHighway. “We’ve made great progress since then; however, our work is far from over. It is critical that federal and state leaders, schools, and service providers continue the hard work necessary to close the connectivity gap.” Governors and state leaders across the country have taken notice and played a crucial role this year in bringing high-speed learning opportunities to every classroom. Today, a total of 46 governors have committed to upgrading their schools for the 21st century. Taking advantage of E-rate Modernization, governors have allocated nearly $200 million in state matching funds for special construction that can help connect the hardest-to-reach-schools.

The American Cable Association says the Federal Communications Commission has to simplify its Connect America Fund II auction framework if it wants to get the most fiscal bang for the buck.

The largest incumbent price cap carriers--AT&T, Verizon, CenturyLink--declined about $2 billion in CAF II support for building out broadband to high-cost, generally rural, areas, in 20 states, so the FCC is opening that pot of money up to competitors, like cable broadband providers, via auction. All that money is coming from the Universal Service fund for high-cost, mostly rural, areas for which there is no business case for building out broadband absent that subsidy. ACA says the proposed auction design is "inordinately" complex, which will at best deter and at worst thwart, participation by many, including the "small town cable operators" FCC Chairman Ajit Pai has said he wanted to encourage to participate.

The Senate Homeland Security and Government Affairs Committee held a hearing Sept 14 titled, "FCC’s Lifeline Program: A Case Study of Government Waste and Mismanagement". Committee members criticized the subsidy program for phone and Internet access that was the subject of a recent watchdog report detailing cases of fraud and abuse. Chairman Ron Johnson (R-WI) said at a hearing that there “probably” needs to be a complete overhaul of the Lifeline program. “We need to completely rethink how we distribute that subsidy,” Chairman Johnson said.

Sen Claire McCaskill (D-MO) called on the Federal Communications Commission to crack down on the companies that she says are defrauding the program. “Why are we providing these companies with this massive opportunity for fraud?” Sen McCaskill said. Both Sens McCaskill and Johnson suggested diverting funds from Lifeline towards programs focused on expanding rural internet access.