FCC Looks to Spend $850 Mil in 2010 E-Rate Funds

FCC Looks to Spend $850 Mil in 2010 E-Rate Funds
October 5, 2011

After initially denying 733 E-rate applicants for internal network connectivity hardware and staff, the FCC, in response to a second request for clarification of Federal Communications Commission rules, has decided to accept all 2010 requests for funding at a projected cost of $250 million. The ruling means that all 2010 e-rate applicants will receive funding, marking the first time in 14 years that has happened. At the same time, the FCC announced plans to rollover the remaining $850 million of the undisbursed 2010 e-rate funds.

E-rate is the common name for the portion of the Universal Service Fund used for schools and libraries. The USF is funded by fees added to all U.S. interstate and international Internet and telephone services, including cell phones, pagers, and payphones—fees that are passed along to customers.

A representative from USAC—the administrator of the E-rate funds— said, “prior to the FCC’s decision, USAC had rendered funding decisions that had used up all of the money that the FCC provided for funding Year 2010, and without additional funds there was no opportunity to fund additional applications.”

Requests Previously Denied
The e-rate program once primarily subsidized Internet connectivity and telephone services for at-risk and rural schools, but it has been expanded to provide subsidies for a host of different services and technologies, ranging from Ethernet and information technology staff to software and training. E-rate provides different levels of subsidies to schools depending on need, which is determined by the percentage of students requiring Title I services or free or reduced lunch.

The services receiving blanket approval under the new FCC ruling—identified as Priority Two services—provide infrastructure hardware and installation for in-school networks. The ruling means the nearly 1,000 applicants’ previously denied subsidy requests will be retroactively granted..

The FCC’s decision came at the request of Funds for Learning, a third-party group that helps schools acquire technology services. “Funds for Learning commends the FCC for taking this action and recognizing the importance for schools to get these critical infrastructure dollars,” said Peter Kaplan, director of regulatory affairs for FFL. “Without the FCC taking a leadership position, millions of students would have been negatively impacted [because] their institutions might not have been able to afford getting fully wired and connected.”

Unwarranted Mission Expansion
The e-rate program has been in hot water recently, receiving flak from Republican members of Congress and others for what they’re calling an unwarranted expansion of the program’s mission. Last year, FCC Chairman Julius Genachowski started a controversial new pilot program that essentially subsidized at-home Internet services and new devices such as iPads for schoolchildren. Earlier this year, Genachowski announced plans to expand the program’s reach further, subsidizing Internet services for the unemployed or underemployed and others in the community.

Those moves and the funding expansions prompted a sharp rebuke from critics.

“The intentions of the FCC are clear: expand the government's role in the telecommunications sector any way possible,” said Marc Oestreich, a technology policy specialist for The Heartland Institute, which publishes Infotech & Telecom News. “This decision marks just another step toward the sad eventuality of an increased federal presence in education as well. It shows just how out of touch the executive branch is with reality.”

Says Tax Cut More Effective
The Universal Service Fund has itself been the center of controversy lately. Depending on the state where the USF fees are levied, USF fees account for 15 percent of customers’ regular service charges on average. In some states the levy is as high as 23 percent. A report released by the Technology Policy Institute in February of this year revealed more than half of all USF subsidies—$.59 of every dollar—paid through the High-Cost Universal Service Fund, an element of the USF which subsidizes traditionally high-cost infrastructure build-out and service, go to general expenses of firms and bureaucracy, not to directly providing support.

Oestreich says, “If it’s the government’s goal to increase broadband access for children, they ought to remove the massive tax that e-rate applies to broadband and phone service. The resulting significantly lower rates would do far more to expand access than would any tax-and-subsidize program that manages to lose half of its revenue to bureaucracy.”

Lizz Milcoff (lizzmilk@gmail.com) writes from La Porte, Indiana.