Talks Down to Wire on FCC E-rate Order as Meeting Looms

Commissioners had been (CD July 10 p1) working on a new draft that would respond to concerns raised by Senate Commerce Committee Chairman Jay Rockefeller, D-W.Va., and Sen. Ed Markey, D-Mass., who said in a letter (http://1.usa.gov/1rTAPyI) to Wheeler the benefits of Wi-Fi “cannot be felt where there is no broadband to support it.”

One idea being bandied about among education advocates was to still use the $2 billion in unused E-rate funds planned under the draft order for Wi-Fi for internal connections, but as a pilot program. It would leave untouched external connection funds and not change the structure of E-rate. Education advocates said they did not know if commission was considering the idea, and one FCC official said he was aware of it. Education advocates were encouraged that Rockefeller and Markey’s letter would prompt the commission to address their concerns about Wheeler’s original draft. They opposed the allocation of education funds per student, with a $150-per-student cap. “But we're still very nervous about what will be presented at the meeting and what the outcome might be,” said National Education Association Director-Government Relations Mary Kusler.

Rockefeller and Markey had urged Wheeler “to take the time necessary to get this right.” In a letter (http://1.usa.gov/1sDyTYt) to the FCC Wednesday, Senate Commerce Committee ranking member John Thune, R-S.D., more explicitly urged Wheeler to “postpone Friday’s scheduled vote” and come up with “reforms that have the bipartisan support of his FCC colleagues.” The item was still on the agenda, said an FCC spokesman, declining to comment when asked how confident Wheeler is that a vote would take place. Wheeler “wants to get this done by July, so they can make the changes they need to make before the school year,” said an education policy lobbyist said. “They're going to move heaven and Earth right now to line up at least three votes."

Industry officials said they expect Wheeler and Commissioner Jessica Rosenworcel, who has publicly pushed for increasing E-rate funding, to reach agreement before the start of the meeting, but they also said the chairman could always pull the item for a later vote. “I've heard that there are major changes being made,” said Noelle Ellerson, associate executive director of AASA: The School Superintendents Association. “I would hope their changes designed to address the Rockefeller letter and to earn Rosenworcel’s vote.” A former FCC official who’s representing clients seeking funding said Wheeler is “between a Rosenworcel and a hard place.”

Pai Estimate

One unlikely vote for the draft is Pai, who estimated in a statement Thursday that Wheeler’s original draft would mean $2.7 billion in cuts over the next five years for external connections, which would mean “many rural schools would lose all of their funding for Internet connectivity in the third through fifth years of the plan.” An official representing Wheeler said staff does not know what assumptions Pai was using. The goal was to modernize E-rate “to ensure that it delivers all the benefits that 21st century technology can bring to students and library patrons,” and as commissioners worked toward a final draft Thursday afternoon, less than 24 hours before the scheduled vote, the goal “remains the same,” the official said.

A Pai spokesman said Wheeler’s draft doesn’t cover the projected increase in the demand for schools to be connected to broadband, a number that the FCC estimates will grow at 5 percent a year over the five years. The savings that would come from decreasing funding for services like voice flattens after only two years under Wheeler’s draft. That, the projected increase in demand for external connections, and the decision to drain $2 billion in reserves for Wi-Fi that otherwise would be available to meet demands for Internet connectivity, will cause a shortfall in funds for connecting schools and libraries to the Internet of $645 million in the third year, a 27 percent decrease in funds for Internet connectivity; $985 million in the fourth year, a 39 percent decrease, and a $1.085 billion cut in the fifth year, a 41 percent decrease, Pai’s office said. The size of the shortfall increases each year because of the annual increase in demand and the item’s diversion of $2 billion in reserves from Internet connectivity to Wi-Fi, Pai’s office said.

It was unknown if commissioners were discussing whether to raise the total $2.4 billion cap, as sought by Rockefeller and Markey, as well as some education groups like the NEA, but one education lobbyist said, “I don’t get the sense that’s being considered, right now.” The lobbyist acknowledged the caveat, “right now,” was in reference to the idea the commission may take up increasing the total cap after the mid-term elections. Pai had said Wheeler’s staff did not deny to him that they had told groups he was planning to take up a cap increase after the November general elections. An FCC spokesman said that “Wheeler will assess whether the long-term funding of the program meets the demand of schools and libraries for high-speed Internet access.”

As outlined during a media briefing last week (CD July 2 p2) , Wheeler’s original draft order called for committing $1 billion a year for internal Wi-Fi connections, an area the FCC was not able to fund last year, largely because E-rate funds were spent on priority one funds, to be called category one under the draft, for external connections, which had higher priority. The internal connections, or category two funds, would be paid the first two years through using $2 billion in unspent E-rate funds. Wi-Fi would be funded the third through fifth years through shifting category one funds that now go for voice services like voice mail and other services like Web hosting, as well as efficiencies and savings from a more transparent process in which school districts and libraries would gain the negotiating leverage of knowing what others are paying for broadband service. The remaining E-rate funds would continue to go for external connections, and an FCC spokesman said funding would be sufficient to meet the goal of connecting 99 percent of schools and libraries over the five years.

Elsewhere on Agenda

Headed into a vote Friday, FCC officials were also still haggling over funding levels for rural broadband experiments(CD June 30 p1). Agency officials said the biggest question is whether the agency should allocate a full $100 million over 10 years to pay for the experiments and, if so, whether more money might be channeled into the program at a later date. Questions also remain about the competitive bidding process that would be used to pick winners of the funds, officials said. Most of the remaining questions are technical.

Also set for a vote Friday is an IP clips captioning order. (See separate report below in this issue.)

In a January further NPRM (http://bit.ly/1q1PKXU), the FCC asked for comment on the experiments. The agency said it planned to fund “a relatively small number of projects, reflecting a diversity of technologies (both wireline and wireless) in different geographic areas.”

The FCC noted in an April 23 order (http://bit.ly/1sCwPQw) “more than 1,000 expressions of interest in rural broadband experiments have been filed by a wide range of entities.” The order also proposed a multiround auction process and awarding funds first starting with higher-tier service. Questions remain on how the FCC will run the auction, evaluate bids and the nature of bidding credits, an agency official said. ,