Critics say plan adds to the already onerous paperwork, spends too much, and is biased towards urban schools

Look out Wi-Fi fearing denizens, the U.S. Federal Communications Commission (FCC) is looking to greatly expand access to the latest and greatest high-speed Wi-Fi in classrooms across the country.

I. The USF -- a Modest Success

The additional $1B USD in annual funding for the effort will come on top of the current $2.3B USD allocated annually to the E-Rate ("Education Rate") program.  Current funding goes towards providing anywhere from 20 to 90 percent of the cost of hardware and services to provide internet access -- mostly wired broadband internet.  Funding is doled out based on how rural or impoverished a school is.

The E-Rate program is part of the "Universal Services Fund" (USF).  While you could argue the pool is an effective "tax" on Americans, it's implemented somewhat differently.  The FCC collects fees from from telephone carriers -- typically a dollar or two offer your monthly phone bill -- to fund the service.  The fee is taken based on a percentage of revenue that a carrier makes on interstate traffic (such as long distance phone calls).

The fund was established when President Bill Clinton (D) signed into law the The Telecommunications Act of 1996, a bill which modernized the The Communications Act of 1934 [PDF] (47 U.S.C. § 151).  At the time of its inception, the biggest purpose of the USF was to fund landlines to poor, rural underserved parts of America.  But in recent years emphasis has grown on improving wireless phone access for poor or rural Americans and to improve internet access at libraries and schools.

Fiber optic cable
The FCC's authorities were modernized in 1996. [Image Source: Guardian UK]

While at times it's been abused, the USF has generally been a modest success.  According to a report from two years ago, in its 15 budget years (1998 through 2012) the program disbursed $90B USD  [PDF] (roughly $6B USD per year).  This year it should top $100B USD in disbursements for the lifetime of the program.

The program has helped to stoke the rural service market to grow to include over 1,000 rural carriers, half of which have fewer than 10 customers per square mile (versus an urban carrier that has 10,000 customers per square mile).

According to the FCC over 22,000 schools and libaries [PDF] receive annual funding to expand their internet quality and access, under the USF's "E-RATE" program.  With roughly 99,000 public schools (according to the U.S. Department of Education) and almost 9,000 public libraries [source], that indicates roughly 1 in 5 public schools and libraries in the U.S. benefit on a yearly basis from the program.  

E-Rate kids
Today roughly 1 in 5 libraries and schools receives discounted internet service via the FCC's E-Rate program. [Image Source: Cabinet Report]

The FCC writes:

When Congress passed the Telecommunications Act of 1996, only 14% of classrooms had Internet and most schools with Internet access (74%) used dial-up Internet access.

By 2005, the E-rate program had successfully connected 94% of U.S. classrooms to the Internet, and by 2006, nearly all public libraries were connected to the Internet (98%).

The EdLinc library coalition adds:

In 1996, only 28 percent of public library systems offered public Internet access. Today, thanks to increased resources and the E-Rate, nearly all library buildings offer public access computing, and 14 million Americans regularly use these computers at no fee. 

Both Republican and Democrat commissioners agree on one thing -- that the E-RATE program has delivered some positive results, in spite of its flaws.

II. New Plan Stirs Controversy

In spite of that success, the USF now faces an uncertain future.  With land line -- its original primary target fading in relevance -- and broadband access now widely available the FCC is looking to morph its campaign into new targets -- namely improving Wi-Fi access.

Not everyone is happy about this shift.

The plan to bump funding only passed 3-2 along party lines, with both Republican appointed commissioners voting against the plan.  Thomas "Tom" E. Wheeler, the lobbyist-turned Chairman of the FCC defended the plan, pointing to an accompanying effort called the "USF Strike Force".

Tom Wheeler
FCC Chairman Tom Wheeler

Chairman Wheeler claims that in the next five years the plan would bump rural school Wi-Fi funding by 75 percent and urban funding by 60 percent.  And he says that the FCC can do that without increasing costs.  But the Republican commissioners were unconvinced.

Republican Commissioner Michael O'Rielly summarized the opposing viewpoint, stating:

Under the current structure, the programs are scheduled to grow to $10 billion in 2015 and steadily increase thereafter to reach $11 billion in 2024.  Most of that growth will continue to be attributable to USF.   This means that in 2024, the funds will be over 21% larger than they were in 2013 and, in those 11 years, the funds will spend a remarkable $13 billion more than they would have if funding had been kept at 2013 levels.  Importantly, this trajectory just represents present circumstances.  In other words, it does not assume that the Commission will make any programmatic changes that would further increase spending.
So what do CBO’s USF projections mean for the average American?  They represent an ever growing strain on their pocketbook.  That is because the FCC—through an entity called the Universal Service Administrative Company (USAC)—simply estimates what will be needed to cover the planned expenditures for the USF programs, assesses telecom providers, and this cost is inevitably passed on to consumers in the form of a fee on their phone bills.   Given the fund’s projected growth, we must be increasingly sensitive to the burdens that this fee creates and strive to limit the amount of any increase.   

That is why I am concerned about the budget aspect of the upcoming reforms to the E-Rate program.  To be clear, I fully support modernizing E-Rate to reflect the current needs of students in the 21st Century.  For too long, the Commission has funded functions that no longer make sense (e.g., long distance phone service and paging) which has detracted from funding the broadband needs of schools and libraries.  Meanwhile, many educational entities seeking needed E-Rate dollars are often deterred by unnecessary hurdles in the current system, which should be streamlined.  Finally, we should greatly improve transparency and do far more to prevent waste, fraud and abuse so that all E-Rate dollars go toward benefitting students and library patrons. 

The other Republican commissioner, Ajit Pai, echoed these comments, focusing his criticism on at least three major points.  
Ajit Pai
Commissioner Ajit Pai (R) [Image Source:]
First he criticizes that the program doesn't go far enough to streamline the onerous applications process...

So what does the Order do to streamline the bureaucracy? Very little. There is the token stab at trimming a few pages from the initial application for applicants with multi-year contracts—but only for five-year contracts that give applicants little flexibility to adjust terms to changing needs. There is some scaling back of E-Rate’s procurement rules—but only for a subset of services that are subject to change every year or two. And there’s the elimination of the technology planning requirement—but no one has had to comply with that requirement for the last two years.

In fact, the Order adds to the paperwork. Applicants will now be required to keep records for ten years. So if the applicant cannot prove that its initial application passed the 28-day-rule, the price-is-the-primary-factor rule, the 30-percent-ineligibility rule, the brand new....

He also complains that the applications process favors poor city schools over poor rural ones.  This echoes criticism recently voiced by Commissioner Pai and Sen. Gerald W. "Jerry" Moran (R-Kans.) in an editorial in The Wichita Eagle.  Even the National Education Association (NEA) -- a traditionally Democrat-leaning teacher's organization -- opposed the plan for giving rural schools the short end of the bargain.  Commissioner Pai writes...

Moreover, the Order keeps in place for priority one services E-Rate’s inequitable funding approach that gives many large, urban districts 90 percent discounts without limit. The more you spend, the more you get. It’s no wonder that, as the current program stands, a handful of urban schools walk away with the lion’s share of funding while students attending other schools that need funding are deprived year after year. Indeed, the District of Columbia gets the second-most E-Rate funding each year on a per student basis ($139.97)—about three times the national average ($44.28)—yet not one school or library in our nation’s capital can credibly be called rural. Once again, those inside the Beltway win while rural America is left behind.

Lastly, he too points to the possibility for budget overruns, stating:

As congressional leaders in the House and Senate recognized, the numbers for the Wi-Fi plan just didn’t add up and would have blown a $2.7 billion hole in E-Rate’s budget, slashing funds for Internet connectivity. I thank Chairman Rockefeller, Chairman Upton, Chairman Walden, Senator Thune, and Senator Markey for their leadership on this issue. I also thank Commissioner Rosenworcel for her efforts. While we have good-faith disagreement on some issues related to E-Rate, we have a common understanding of arithmetic.

Rural school busCritics complan the plan favors rural schools over urban ones. [Image Source: Ed. Dept.]

On the latter point Chairman Wheeler emphatically disagrees.  He says that the funding can be pulled from less crucial current E-RATE programs, freeing up $1.2B USD for school Wi-Fi.  He writes:

First, we would phase down support for non-broadband services, like pagers, email and, over a multi-year period, voice service. Those funds – nearly $1.2 billion in the E-rate program today – would be repurposed to support Wi-Fi.

But the idea of cutting out such services has some Democrats questioning the plan as well.  Representative Anna Georges Eshoo (D-Calif.) says that it'd be better to raise taxes and have a well funded program than to cut current expenditures in lieu of new efforts like Wi-Fi.

Either way, the program is only a stop-gap measure anyhow, as in 2018 the FCC will complete a 6-year transition process and go from the USF High-Cost Program to the "Connect America" fund.  While the Connect America fund is expected to have similar funding goals as the current reshaping of the USF towards wireless and broadband (and away from the original goal of rural landline telephone service), it will offer a new time to debate who should receive what funding.

Also, the Wi-Fi effort overlaps the executive branch's ConnectED program, which aims to give every school in the U.S. a 100 Mbps cable internet connection by 2017.  As for the USF's fate in its finally few years, many questions remain.  But while Chairman Wheeler has faced some resistance and hesitance to his plan, arguably his E-RATE proposal has gone over more smoothly than his current net neutrality plan, which proposes allowing corporations to create "fast lanes" and "slow lanes" on the internet, double-dipping by charging both internet content providers and inter service user duplicate fees for delivering content from the provider to the end user.

Sources: FCC [1], [2], [3], The Verge

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