Wheeler Willing to Raise USF Contribution Rate If Necessary to Fund E-Rate

Wheeler will soon create a “special strike force” to ensure all USF money is wisely spent in a way that emphasizes “adherence to the rules,” he said. The Universal Service Administrative Co. is “instituting a process to accelerate the speed in which all applications are processed,” Wheeler said, “emphasizing the need to more quickly process those applications that will utilize funds for scalable high-speed broadband connectivity.” Consortium-based applications, which are most likely to get the best bang for the buck, will be “acted on first, not last,” Wheeler said.

Some question whether a major revamp of the E-rate program might be delayed until after the congressional midterm elections in November, Davis Wright telecom attorney Jim Smith told a Comptel event Monday, which was webcast from Las Vegas. There’s a possibility Wheeler might not want to adopt a “controversial or perceptively big program before the midterm elections,” said Smith, who was Comptel CEO in the 1990s. An FCC spokesman told us Wheeler has said he plans to issue an order later this spring, the results of which would go into effect in 2015.

Reforming the multibillion-dollar program has been a top priority for Wheeler. Improving educational access to technology has also been an important goal for President Barack Obama, whose ConnectED initiative has elicited hundreds of millions of dollars in pledges of support from telcos and technology companies. That presidential support may itself cause problems for the Democrats, Smith said: Obama wants this to be his “legacy” for the second term, which could engender opposition “just for that reason."

Some Democrats, Smith said, are “thinking of E-rate expansion as almost a farewell present” to Sen. Jay Rockefeller, D-W.Va., who started E-rate in the mid-1990s and is retiring after this term. There’s a “vested interest on the Democratic side” of seeing E-rate succeed and expand, he said. That’s in contrast to the Republican commissioners who support E-rate modernization “in principle” but remain skeptical of “another big government program that shouldn’t be spending so much money,” Smith said. He also pointed to Republican resentment (CD March 10 p11) that the Wireline Bureau recently asked on delegated authority for “focused comment” in an item that Commissioner Ajit Pai said would have been better handled by the full commission. (See related story in this issue.)

"We are sensitive” to the contribution rate, which “falls more heavily on us and our customer base than on others,” said Jeb Benedict, CenturyLink vice president-federal regulatory, at the Comptel event. If USF were increased to allow additional E-rate support, there would need to be a commitment to “complete contributions reform” with a broadened contribution base, Benedict said.

CenturyLink has been “investing very heavily” to reposition itself as a broadband business as demand for traditional phone service falls, Benedict said. But regulators “shouldn’t take our ability to invest for granted,” he said, pointing to CenturyLink’s “limited capital budget.” With each community the ILEC builds out to, it gets to a lower density, he said: A third of its wire centers have a density of fewer than 10 connections per square mile. Ability to invest in delivering broadband to the home is affected by FCC policy, and by availability of high-cost fund support, “which we wouldn’t want raided for E-rate purposes,” Benedict said.

Associate Wireline Bureau Chief Trent Harkrader said he expects Wheeler to “attempt to push through a permanent modernization” of the program that’s based on a solid needs assessment. “We are looking at this program for the long haul, and in fact the president has told us that we need to look at this in the long haul,” Harkrader told Comptel. “The E-rate program needs to change.”