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Commission Document Attachment

DOC-328172A7

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DISSENTING STATEMENT OF

COMMISSIONER MICHAEL O’RIELLY

Re:

Modernizing the E-rate Program for Schools and Libraries, WC Docket No. 13-184.

This order represents a missed opportunity to comprehensively reform the E-Rate program to

ensure that it meets the needs of students and library patrons in the 21st Century. The order spends a

minimum of $2 billion on the policy du jour—closing the so-called Wi-Fi gap—while largely neglecting

the rest of the program. And it initiates this new spending spree without having first determined the long-

term budget for the entire program. As a result, the shortsighted decisions today could lead to either a

funding cliff for schools and libraries or higher phone bills for American ratepayers. Therefore, I must

strenuously dissent for both process and policy reasons.

In my short time at the Commission, I have not publicly criticized process issues. Instead, I

prefer to focus on substantive concerns, if any, and address internal procedure behind the scenes.

Unfortunately, the process used for this item was unacceptable. Let me explain my frustration and

disappointment. Before the item was even circulated, I held two briefings with Commission staff to

understand the direction it was going. In response, I submitted big picture edits that respected their

direction. Again, this was before the item circulated. I believe my proposed edits kept to my principles

while still showing a great willingness to compromise. I then held two more meetings with Commission

staff in which I explained my thoughts and concerns and sought their input on what was doable—all the

while making clear that I wanted to get to “yes.” Weeks passed as I waited for a response. During that

time, my staff and I were told to hold off on suggesting any further edits to the item until a new document

could be circulated.

That opportunity never came. Instead, late last night, I received a new document

only to learn it would be a straight “NO” across the board for any of my edits and suggestions. A goose

egg. No attempt was made to work out even the smallest of details. In the end, I never expected to get

everything I proposed, but I don’t believe it is appropriate to refuse to negotiate with me just because I am

a Republican appointee.

To be clear, I support E-Rate. It has been helpful in bringing telecommunications and Internet

service to virtually all schools and libraries. That connectivity has expanded access to educational

resources benefitting teachers and students. And it has enabled people that might not otherwise have

Internet access to use it at a library to obtain information, apply for jobs, and perhaps even file a

complaint or comment with the FCC.

Early on, I set forth my principles for E-rate reform: refocus the program on broadband by

eliminating outdated services; keep within an overall USF budget so reform doesn’t come at a cost to

consumers; leverage existing investment rather than overbuilding; increase matching requirements

consistent with other programs; don’t oversupply; and overhaul program administration. Accomplishing

reform within these broad guideposts should have been easily achievable. But today’s order rejects

modifications based on these principles, defers others, and takes questionable half measures on the rest.

And it does so in a brazen partisan fashion.

Fundamentally, I am concerned that this order shies away from comprehensive reform, even

though the record is clear that such changes are long overdue. Promising to expand the scope now and

reform the rest of the program later is a sleight of hand tactic that we see all too often in Washington,

D.C. It is irresponsible.

If we were serious about reforming the entire program, then why not at least put

a serious proposal for the remaining reforms in the Further Notice rather than seek comment on an

assortment of odds and ends and a budget increase. It is even more disturbing to hear informally that the

justification for deferring the budget decision is to get the issue past the November elections. Obviously,

the Commission is worried that Americans won’t like the budgetary effects of the changes we are

considering on their pocketbooks, and therefore we have to slide them in after the election when they

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can’t do anything about it for a while.

To me, this is a clear sign that we should reconsider the underlying

decisions.

Relatedly, I disagree with the order’s single-minded focus on Wi-Fi. While some schools and

libraries may benefit from improved Wi-Fi access within the building, others still need connectivity to the

building. Connectivity is still a necessary prerequisite. And demand for bandwidth will only increase—

indeed, it could be intensified by making Wi-Fi more widely available. Yet we do not adequately address

that here.

I am especially worried about initiating a new, perceived Wi-Fi entitlement without having a

long-term plan, much less a sustainable one, for the entire program and USF spending. After two years,

it’s not clear whether funding will continue to be available for Wi-Fi. That’s hardly the predictability that

schools and libraries need. Or perhaps, by then, the majority of the Commission will have tried to ram

through an increase in the E-Rate budget. If a justification can be made to increase the E-Rate budget,

then that makes it even more imperative to establish an overall budget for USF so that consumers that pay

fees on their phone bills to support USF are not further burdened by the FCC. Instead, I am very troubled

that we will be told to look the other way and just increase the contribution factor even more. And if we

consider it here, I fully expect that there will be calls to increase contributions for the other programs too.

I stand ready to be corrected on this point, but it always seems easier for some people to take more money

from the American people via higher taxes and fees rather than do the hard work. If more funding is

necessary for E-Rate, let’s dig in and find offsets, not stick it to hard-working poor and middleclass

Americans.

In terms of the item specifics, let me just touch upon a few, although there are so many. First, I

find the assumption for tying E-Rate support to libraries on a per foot basis to be one of the silliest

policies I have ever seen. The size of a building is supposed to be the proxy measurement for how much

subsidy a library should get? It makes as much sense as counting roofing tiles, toilets, or surrounding

trees. I can’t believe this is the best we can do.

Second, I’m mystified by the decision to increase the matching requirements, but only for internal

connections and only for the poorest schools. That is completely backward. More skin in the game

through higher matching rates is important for all discount levels so we can stretch E-Rate dollars further

and promote greater efficiencies. Since we seem to agree that’s a good policy, I don’t understand why we

wouldn’t apply it across the board.

Third, I do not see where lowest corresponding price is reflected in the underlying statutory

authority. The statute calls for a “discount,” not the lowest price plus an additional discount.

Congress is

completely aware of how to establish a requirement to offer the lowest price, if it chooses to do so, as it

did many years ago with lowest unit rate for political advertising. It did not do so in this instance, and

therefore I am not in agreement with our current rules that suggest otherwise. While our interpretations

may have been upheld, it’s never too late to follow the statute. Moreover, this misguided policy has

spawned unnecessary confusion, tying up funding while the Commission and USAC try to sort out how to

apply it in practice. And now we are upping the enforcement ante.

Fourth is the assault on the Commission’s competitive bidding process. The record made clear

that competition in the program can dramatically reduce costs, allowing schools and libraries to make the

most of their E-rate funds. While it may be true that avoiding competitive bidding could speed up timing,

exempting services from these important requirements is also the way to install graft, fraud, waste, abuse,

and criminal behavior. For a Commission that is supposedly focused on competition, this is a puzzling

step backwards.

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Last and most infuriating, the item delegates so much authority to the Bureaus and USAC to do

almost whatever they would like, whenever they would like to do it. This is not a criticism of our

professional staff, who are dedicated and hardworking, but rather I worry this mechanism is a way to

remove accountability and bury decisions that should be made more public.

I thank the staff for their many briefings and only wish they were authorized to actually consider

a balanced plan that we all could support. Perhaps next time we will have the opportunity to roll up our

sleeves and work together in a bi-partisan manner to complete necessary reforms.

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