E-rate NPRM Expected to Prove Controversial, Seen as Part of Bigger Debate on Entitlement Reform

An FCC rulemaking on potential changes to the federal E-rate program has touched a political nerve in a Washington, where the debate takes place against the backdrop of a bigger fight between Republicans and Democrats over entitlement reform. The NPRM, teed up for a vote Friday, builds on a June speech by President Barack Obama urging the commission to make high-speed Internet available to enough schools and libraries to connect 99 percent of American students (CD June 7 p7).

"Right now, when a lot of fiscal conservatives are concerned about a lack of entitlement reform, here we have a big push to expand yet another entitlement,” said a former FCC official who’s now an industry lawyer and not involved in the proceeding. “The E-rate debate is a microcosm of a much bigger fight over the scope, size, power and cost of government."

The E-rate program was the topic of a sometimes contentious hearing Wednesday (CD July 18 p5) by the Senate Commerce Committee. Chairman Jay Rockefeller, D-W.Va., is an advocate of expanding E-rate, and issued a statement supporting the NPRM the day it was circulated by acting FCC Chairwoman Mignon Clyburn. But committee Republicans, led by Ranking Member John Thune, R-S.D., questioned the wisdom of expanding the program. Commissioner Ajit Pai this week offered his own version of E-rate reform, emphasizing the money should fund next-generation Internet services over standalone voice telephone service, let schools know before the academic year begins how much they have to spend and require that matching funds be received (CD July 17 p2).

Ex-Commissioner Robert McDowell recounted the history of E-rate, which began its life as the Schools and Libraries program created by the 1996 Telecom Act to connect schools and libraries to “the information superhighway.” Part “of the debate will center on the fact that its original mission has been largely accomplished, which is good news,” said McDowell, now at the Hudson Institute’s Center for Economics of the Internet. He said the challenges with expanding E-rate is that the costs have to be paid somehow. “Expanded E-rate spending could have two results,” he said. “One scenario is it’s a zero sum game against other Universal Service programs, meaning they get less as E-rate gets more. The second scenario could be that the contribution factor, the USF ’tax’ on consumers, goes up. Or a combination of the two. These scenarios create tension and friction."

But former Commissioner Michael Copps said changes to the E-rate program are necessary. “It’s long past time that we took E-rate to the next level,” he said. “The program worked wonders in getting schools connected, but technology has moved way beyond those basic connections. If our kids are going to have opportunity to grow and prosper in this hyper-competitive world of ours, E-rate needs to grow with them. We're not taking broadband seriously if we don’t do this.”

"Conservatives support the digital learning goals of the E-rate program, but have legitimate concerns that the current implementation of the program is not supporting those goals,” said Fred Campbell, director of the Communications Liberty and Innovation Project and former chief of the Wireless Bureau. “These concerns could be mitigated by reforming the program to reduce waste, fraud, and abuse as envisioned by FCC Commissioner Pai. I expect conservatives could support expanding a modernized E-rate program if the expansion were supported by a revenue neutral source of funding that was targeted at enhancing students digital learning opportunities.

"As an initial matter, it is hard to find something in Washington these days that is not ‘controversial,'” said Public Knowledge Senior Vice President Harold Feld. “Reason has very little to do with it anymore. For a handful of conservatives, the FCC has become a dog whistle, and any agency action prompts them to bark in rebuke -- at least until they get a Republican chair.” It’s unfortunate that E-rate has become “muddled” in the fight over Lifeline, said Feld. “This is largely a self-inflicted wound. When Sen. Claire McCaskill [D-Mo.] proposes to kill Lifeline to fund E-rate, it creates needless tensions between supporters of both programs. The FCC needs to speak loudly, clearly and collectively that this is not some sort of Hunger Games where USF programs fight each other and only one can survive."

Rockefeller’s willingness to “take a stab at improving the program” is “incredibly important,” said a public interest group official familiar with the E-rate negotiations at the commission. Rockefeller had been one of the biggest supporters of leaving the E-Rate program untouched, while Commissioner Jessica Rosenworcel, who worked for him before she was a commissioner, “now has his blessing, as well as the administration’s, to move forward on E-rate 2.0,” the official said. There has been some controversy of E-rate taking funds away from Lifeline, or encroaching on other programs, the official said. Because the FCC has “made it clear that they're not looking to have one program gut the other,” the NPRM could address how to balance funding between the programs, said the official. Proposals to ease the administrative burden of applying for E-rate funding are actually “somewhat controversial,” the official said: It should be easy for schools and libraries to apply without hiring a consultant, but it’s also important that they have a long-term plan to demonstrate “they know how to use this broadband access” and that the funds will be efficiently used.”

Less Government President Seton Motley said the U.S.’s $17 trillion deficit means programs like E-rate can’t be expanded. “In the face of example after example after example of government fraudulently spending our money to the tune of hundreds of billions of dollars per year, in the face of example after example after example of our E-rate money being fraudulently spent, in the face of all of this -- the Barack Obama Administration demands more E-Rate money be spent,” he said by email. “With no acknowledgement of the rampant waste, let alone any offering of any plan to at least pretend to rein it in, just more of our cash shoveled down the rat hole. … The road to bankruptcy is paved with good intentions."

The discussion is tinged by partisanship, said Lindsey Tepe, education policy program associate at the New America Foundation. Pai was “almost offering a dissenting opinion” when he criticized the idea of a national broadband target speed, she said. The true contention will come from the costs of plans like ConnectED or Rosenworcel’s E-rate 2.0: “I don’t think Commissioner Pai really objects to the idea that for every thousand students you should have a gigabit of connectivity, it’s just that that’s very expensive to achieve,” Tepe said.

The FCC has the “habit of issuing NPRMs that are actually NOIs,” said Berin Szoka, president of TechFreedom. That’s not necessarily a bad thing, he said, if the commission “simply asks questions that helps set the stage for having a more informed decision making process.” Given that there are “several competing proposals,” and Clyburn has not “explicitly endorsed something,” it’s likely that the NPRM will be more questions than proposals, he said. “It’s not as if, even on the Democratic side, there is a clear, actionable proposal already on the table."

"The president has given [the FCC] all the air cover in the world to initiate change,” said John Harrington, CEO of Funds for Learning, which provides E-rate compliance support. Harrington downplayed the idea that there’s a huge political divide. “I think there’s more agreement between what Rosenworcel said and Pai said than maybe appears on the surface,” he said. “At the end of the day everyone says, ‘Hey, we have to have our students connected.’ And I think that’s the heart and soul of what President Obama was saying.” After that, there’s room for debate on how to do that, he said, but the initial agreement is there. Ultimately, a one-size-fits-all technology plan for each school building won’t be feasible: “You've got to have a system that accommodates 20,000 different school districts,” he said. “You can’t do that sort of calculus from D.C.”

Pai “has raised some good points that ought to be addressed in any examination of the E-rate program,” said Free State Foundation President Randolph May. “Obviously, the original purpose of the program -- connecting schools and libraries to the Internet -- has been largely fulfilled. This doesn’t mean that there is not some role for an ongoing federal E-rate program. But it does mean that hard questions ought to be asked and answered concerning costs and benefits in the context of examining a program that doles out $2 billion per year -- and which is paid for by a tax. … It ought not to be enough for the program’s proponents simply to invoke mantras like ‘education’ or ‘need for speed’ or ‘more bandwidth’ to stifle discussion concerning whether the funds are producing measurable benefits and whether the federal government is in the best position to administer the program and judge the results."

Phoenix Center President Larry Spiwak said Pai’s speech this week was important. “Before we do anything we should bring out the waste, fraud and abuse in the program and refocus to what we need to get done,” said Spiwak. “That, of course, is a huge challenge. … We've done research that says that demand-side programs will certainly be beneficial by getting Internet in schools it creates demand and increases adoption. But with any of these types of programs there’s going to be waste, fraud and abuse … and that’s the problem.”