FCC Adopts E-Rate Overhaul, Indexing it to Inflation and Allowing Leases
The FCC approved an order letting schools and libraries lease dark fiber for broadband use, community use of schools’ broadband networks after hours and tying the E-rate cap to inflation. Indexing E-rate to inflation, as had been expected (CD Sept 8 p1), may mean the $2.25 billion annual cap will be raised for the first time in its history. The inflation measure caused Republican Commissioners Meredith Baker and Robert McDowell to part ways with their Democratic colleagues. Baker concurred on inflation and McDowell dissented. Both said they thought the Universal Service Fund -- of which E-rate is a part -- requires comprehensive reform.
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Chairman Julius Genachowski said the order is “a substantial upgrade and modernization of the E-rate program. “Basic connectivity in schools is too slow. Ninety-seven percent of schools are connected, but our work found that 80 percent of our E-rate recipients need faster service,” he said. “The goal [of Thursday’s order] is -- and I think the result will be -- more bang for the E-rate buck."
Some 78 percent of E-rate recipients said they need faster connections to meet the speed and capacity demands of their users, the FCC said. But the program has had “enormous success” with 97 percent of U.S. schools and almost all public libraries having basic Internet access, the agency said. Since the 1997 start of E-rate, inflation has meant costs have risen 30 percent, though the program has remained capped, the regulator said. “Earlier this month, the Commission reserved hundreds of millions of dollars annually from another program of the Universal Service Fund to cover the incremental E-rate support (less than $25 million next year) it is providing, without growing the overall size of the Universal Service Fund."
The E-rate fund has a surplus of $900 million from unspent funds, McDowell said. “In light of this, I question why the commission is raising the cap when the fund has almost $1 billion in unused cash.” He also said he had long advocated a more thorough overhaul of USF “in lieu of piecemeal decisions” like Thursday’s order.
Baker, too, thought it “would have been more prudent to delay” the E-rate cap measure “until we're further down the road” on universal service reform, she said. “I feel strongly that the commission must remain vigilant. E-rate is a success story of which this commission can be proud."
Commissioner Michael Copps called Thursday’s order “another step forward for our National Broadband Plan.” He and Democratic colleagues defended the inflation indexing, saying that schools and libraries had lost about $665 million in purchasing power because the E-rate cap hadn’t kept up with inflation. He called it “a modest adjustment” that had already been approved by his colleagues in the broadband plan. Thursday’s vote was also “repair” of a “mistake” the commission made when it took dark fiber off E-rate’s eligible services list in 2003, he said. Nonetheless, Copps said he was concerned about an item in the order that creates pilot programs for off-campus broadband use. He said he “cautiously supported” the programs, but wanted to make sure that E-rate’s core mission -- bringing high-speed Internet to the nation’s schools and libraries -- wasn’t abandoned.
The order has “countless” benefits for kids in school, Commissioner Mignon Clyburn said. “We are protecting the purchasing power of recipients. We are also encouraging faster speed and more bandwidth by encouraging schools and libraries to take advantage of fiber networks that have already been laid. I am a strong proponent of making the most available of what our universal service fund has to offer."
The Education and Library Networks Coalition “wholeheartedly supports many of the changes that today’s order adopts” but the order doesn’t go far enough, it said. “The Commission’s decision to adjust the cap annually based on inflation is a useful first step but falls far short of the escalating demand for broadband services and applications in our nation’s schools and libraries,” the group said. “The inflationary adjustment may provide little or no additional funding to E-rate this coming year as the economy may produce a zero inflation rate.”
The dark fiber section of the order gives schools and libraries “more flexibility” in meeting their broadband needs and will spur innovation in research and education, Schools, Health and Libraries Broadband Coalition Coordinator John Windhausen said. AT&T is “disappointed” with the dark fiber item, a spokesman said. “To be clear, dark fiber is a technology, not a service,” he said. “Dark fiber does not connect students to the Internet -- electronics and a network separate and apart from the ‘dark fiber’ are required for that connectivity. Using the limited funding that is available for the E-rate program to fund specific technologies that do not themselves provide access to the Internet goes beyond what the program was designed to support -- connecting students to the Internet.”