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Commissioner Pai Remarks Before The FCBA

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Released: June 18, 2014
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REMARKS OF COMMISSIONER AJIT PAI

BEFORE THE FEDERAL COMMUNICATIONS BAR ASSOCIATION

WASHINGTON, DC

JUNE 18, 2014

I was a little surprised when I received the invitation to address this year’s FCBA Annual

Meeting and Luncheon. Last February, you might recall, I droned on at length to all of you about the

scintillating issue of FCC process reform. To this organization’s credit, many in the audience actually

managed to stay awake during my remarks. Unfortunately, some did not. In fact, I have here in my hand

a list of FCBA members who are known to the FCC to have slept through the speech and who

nevertheless are still appearing before the agency.

Anyway, after my choice of topic, I wasn’t expecting to be asked back. But flash forward sixteen

months, and here I am again. I can only conclude one of two things. Either John Oliver was unavailable,

or you must be gluttons for punishment.

In any event, I’m going to be candid with you. There’s not much to talk about today. It’s been

pretty quiet of late at the Commission. Friends outside of the communications milieu are asking me again

whether I work at the FEC, FTC, or SEC. Sometimes, I wonder if the outside world even knows we exist.

No, as you know, we’ve been at the center of controversy. Protestors have camped outside of our

building. Songs serenading the Commissioners have been uploaded to YouTube! We’ve received some

public comments that are—how should I put it—more colorful than usual. And late-night comedy shows

have taken their swipes, too. It all brings to mind the title of that 1976 hit by the Eagles: “Life in the Fast

Lane.”

And the discord has seeped into the Commission building, too. There have been complaints

about process. There’s been anonymous griping to the press. There have been tense, late-night

negotiations between parties with seemingly intractable differences on the issues, waiting to see who will

blink first. And that’s just among the Democrats!

On a more serious note, the four highest-profile matters we have taken up over the last three

months—the incentive auction, mobile spectrum holdings, media ownership, and “net neutrality”—have

each come down to a straight party-line vote. That’s not the way it should be.

It will never be possible for us to reach consensus on each and every issue. But we should always

be willing to go the extra mile to forge a bipartisan agreement. It not only lends our decisions more

legitimacy and increases public acceptance, it also improves our work product. No one Commissioner

and no one party has a monopoly on wisdom. And our policies are better when they reflect give-and-take

among all the Commissioners.

For example, this past January, the Commission was unanimous in establishing a framework for

IP Transition trials. It wasn’t easy. The negotiations were tough. All of us had to compromise. But in

the end, it was worth it. Each Commissioner made suggestions that improved the final result. And we

produced an order that received widespread public support and allowed the agency to stand unified on a

critically important issue. I’d say the Rolling Stones captured well the lesson to be learned: “You can’t

always get what you want. But if you try sometime, you just might find you get what you need.”

I’m disappointed that this spirit has been absent from many of our recent deliberations. But I’m

hopeful that it will return. We have no shortage of work ahead of us. This gives us the chance to turn the

page and leave any disagreements in the past, where they belong.

In particular, I believe that we have a real opportunity to work together this summer to reform the

E-Rate program on a bipartisan basis. That’s what I’d like to talk about this afternoon.

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As you know, the E-Rate program is part of the Universal Service Fund. It provides about two

billion dollars each year for schools and libraries to connect to the Internet. E-Rate has had its share of

successes. But the program is seventeen years old and badly in need of an overhaul. Indeed, there’s a

broad consensus on the need to modernize the program.

I am a part of that consensus. Early last summer, I asked my staff for a top-to-bottom review of

the E-Rate program. What parts of the program needed improvement? And how could we improve it?

After many pages read, many long hours of discussion, and many charts and spreadsheets, I proposed a

comprehensive plan for E-Rate reform. At the time, some people were surprised that I was getting

involved in the issue. Why was a Republican Commissioner taking a leadership role on E-Rate? Well,

my answer to the skeptics is twofold.

First, parents across this country understand that we can’t prepare children for the world of

tomorrow in a classroom of yesterday. All of us want our children to be able to take advantage of the

most promising innovations in digital learning. Otherwise, we run a real risk of denying educational

opportunity to rural Americans, to poor Americans, and to others yet to partake of the bounty of

broadband. If universal service means anything, it means not leaving these Americans behind simply

because of who they are and where they live.

Second, improving educational opportunities for our nation’s kids shouldn’t be a partisan or

ideological issue. The program was created on a bipartisan basis by Senators Rockefeller and Snowe.

The FCC’s original E-Rate rules were passed in 1997 by a unanimous, bipartisan vote. At the time, my

friend, Republican Commissioner Rachelle Chong, called it a “splendid new program” that would “help

catapult our society further into the Information Age.” All of this means something beyond the dry pages

of the Code of Federal Regulations. And so, with the moment at hand to modernize the program, with a

unique chance to meet the challenges of the 21st century, we should move forward again on a bipartisan

basis.

Feel-good platitudes won’t get the job done. That’s why I’ve taken the time to put pen to paper.

That’s why I have been upfront from day one about what my plan is and why I believe in it. You can find

a detailed summary of my vision for schools on the FCC’s website, and I’m releasing today a detailed

summary of my vision for libraries too.

My guiding principle is simple. We need a student-centered E-Rate program. A program mired

in bureaucracy must become one focused on kids and digital learning.

My proposal has five main elements. First, we should streamline the program. Second, we

should target next-generation technologies. Third, we should allocate E-Rate funds more fairly and

predictably. Fourth, we should increase transparency and accountability. And fifth, we should be fiscally

responsible. Let me take a few minutes to explore each plank of my plan.

First, simplicity. The current rules for E-Rate are so complex that many schools and libraries

don’t even bother applying. I’ve found that few things are more likely to generate an eyeroll than merely

mentioning the application process to school or library officials. Those who do apply are often forced to

divert money away from classrooms and reading rooms in order to hire E-Rate consultants to navigate the

process.

Complexity also means delay. If all goes relatively well, it can still take years for applicants to

receive funding. And if a school or library makes an inadvertent mistake, it may have to file an appeal,

which can take even longer to resolve. Some appeals are still pending from 2003—when the biggest

news in tech was Apple introducing the iTunes Store. None of this serves our nation’s children well.

My plan would dramatically simplify E-Rate. The initial application form would be just a single

page. No more need to hire outside consultants. No more long waits for E-Rate funds. And many fewer

errors filling out complex paperwork would mean many fewer appeals.

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Second, we must refocus the program on delivering next-generation technologies. Today, the E-

Rate program prioritizes things like telephone service over connecting classrooms to the Internet, whether

by wires or Wi-Fi. We spend about $600 million dollars a year (over one quarter of the annual E-Rate

budget) on voice telephony services.

Meanwhile, the vast majority of schools and libraries can’t get any money for connections.

Indeed, during the most recent application cycle, not one funding request for connecting classrooms—not

one—has been approved. In 2014, when voice is quickly becoming just another application riding over a

broadband network, this makes no sense.

My plan would redirect funding from stand-alone telephone service to broadband. It would also

end the distinction between so-called priority one and priority two services and let local communities

decide how funds could best be used to help local kids. Putting students first also means directing money

only to instructional facilities. No more E-Rate funds for bus garages or football fields.

Third, we must allocate E-Rate money more fairly and more predictably. Right now, funds are

distributed in a way that this audience might call arbitrary and capricious. Urban states can receive more

money per student than rural states. States with a high poverty rate can receive less money per student

than wealthier states. The E-Rate application process doesn’t coincide with schools’ normal budgeting

cycle, which makes short-term planning difficult, if not impossible. And a school’s funding can vary

widely from one year to the next, which makes long-term planning difficult, if not impossible.

My plan would provide more equitable and stable funding. Schools would receive money

annually on a per-student basis; libraries on a similarly objective basis. Schools in rural and low-income

areas would get a bump, as would smaller schools. The funding stream would be steady. And each

school would be given an E-Rate budget so school boards and parents would know how much funding is

available at the beginning of the school year.

Fourth, we must increase transparency and accountability. Right now, if you want to find out

how your local school or library is using its E-Rate funds, I wish you the best of luck. But under my plan,

a central website would enable anyone—parents, journalists, FCBA members—to find out exactly how

any school or library in the United States is spending its E-Rate money. By bringing this information into

the sunlight, we will promote effective oversight and the wise expenditure of funds.

And fifth, we must be fiscally responsible. The E-Rate program currently encourages wasteful

spending. There is no limit to what any single school or library can receive. And the more money it

spends, the more money it gets from the program. Some schools receive nine dollars from the program

for every dollar they spend. Examples of excess are legion.

My plan would end these skewed incentives. It would require schools and libraries to have more

skin in the game. Schools and libraries would have to contribute at least one dollar for every three they

get from E-Rate, just as a unanimous FCC required Rural Health Care Program participants to do in 2012.

And, as explained earlier, each school and library would be given a fixed budget so the sky would no

longer be the limit for funding requests.

Over the past year, I’ve seen firsthand the problems with today’s E-Rate program. I visited

Siouxland Libraries in Sioux Falls, South Dakota. Siouxland doesn’t bother applying to participate in E-

Rate. Why? The library’s director, Mary Johns, told me that the program was just too complicated.

They sure could’ve used the help, both at the main branch and at several remote locations that they can

only afford to staff a few hours each week. My reforms would give Siouxland Libraries the help they

need.

I’ve also seen firsthand the benefits that a student-centered E-Rate program like mine could bring.

I spent an afternoon at a Los Angeles school where I learned what could be accomplished by connecting

more classrooms. In Javier Peña’s 7th grade class at the San Fernando Institute for Applied Media, each

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student has an iPad and is connected to the Internet through Wi-Fi. The day I visited, Mr. Peña was

teaching his students about tessellation, which is a shape repeated over and over again to cover a plane

without any gaps or overlaps.

Back when I was a student, a teacher probably would have lectured about such a topic while the

kids took notes with No. 2 pencils. But in Mr. Peña’s class, the experience was far more interactive, and

the children were much more engaged. They were using their iPads to find examples of tessellation and

learn about its use in Islamic art and architecture.

Later in the day, I had the opportunity to speak with Ms. Robledo, the school’s principal, as well

as the school’s teachers and several parents. They told me about how the school’s embrace of technology

was having a very positive impact on the students. By allowing children to become active participants in

their own education instead of passive recipients of information, students were retaining more knowledge

and becoming intellectually curious.

These conversations and others like them have only strengthened my belief in the need to move

forward with a student-centered E-Rate program. And if press reports are to be believed, E-Rate soon

will be on the Commission’s agenda.

Now look, I’m realistic. I don’t expect the Commission to adopt my plan lock, stock, and barrel.

(Of course, if my colleagues are so inclined, I won’t stand in their way.)

I do believe, however, that there is broad, bipartisan agreement on many of the principles that are

critical to a student-centered E-Rate program, and that we have a real chance to make substantial progress

towards achieving that goal.

When it comes to simplifying the program, Commissioner Rosenworcel has stated that we must

“reduce the bureaucracy associated with E-Rate” because that bureaucracy “has become too much for too

many of our schools to bear.”

When it comes to focusing funds on next-generation technologies for kids, Commissioner

Clyburn has said that we must “phase out funding for unnecessary services.”

When it comes to distributing money more fairly, Chairman Wheeler has observed that it “is far

from equitable” when “urban school districts receive over 80 percent of the funding for Wi-Fi.”

When it comes to enhancing transparency, the Commission’s unanimous Notice of Proposed

Rulemaking endorsed “increas[ing] the transparency of E-Rate spending.”

When it comes to promoting fiscal responsibility, Commissioner O’Rielly has stated that

“[i]ncreasing matching requirements would help control costs.”

Our record, too, reflects a sweeping consensus that the E-Rate program needs real reform. More

of the same just won’t work. Indeed, a bipartisan group of 46 Members of Congress recently sent a letter

to the FCC endorsing many of these principles. Among other things, they asked the FCC to focus E-Rate

on broadband, increase transparency and accountability, simplify the application process, and ensure

stable funding for schools and libraries.

A bipartisan agreement on E-Rate reform is achievable, but it won’t be easy. The road ahead has

some pitfalls. Here are two of them.

First, we can’t tinker around the edges and declare victory. We can’t squander this chance to

embrace fundamental change. For instance, we have to radically simplify the program. Cutting a page or

two from a seven-step process with six different application forms isn’t real reform. If some school

administrators and librarians still have to hire consultants to navigate the E-Rate labyrinth after we adopt

new rules, and if others still don’t bother applying at all, then our efforts will have failed.

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The second pitfall involves the E-Rate program’s budget. Some have rejected creative reforms

and essentially demanded that the Commission increase the budget. But these inside-the-Beltway

advocates always think that “education reform” just means more money from Washington, DC. I’ll

concede: That solution would be quick. It would be easy. But when it comes to E-Rate—to borrow from

Yoda in The Empire Strikes Back—if you choose the quick and easy path, you will become an agent of

the status quo.

So let me make my position as clear as possible. In the months ahead, I will not support any

reform plan that boosts E-Rate’s budget. Since the beginning of 2009, the universal service contribution

factor has increased from 9.5% to 16.6%—that’s over an 80 percent increase. I will not ask Americans to

pay even more in their monthly phone bills, especially when so many are struggling to find work and

make ends meet.

Instead of throwing more money at the program, we need actual reform that will get us the most

bang for our bucks. Along those lines, here’s a convenient truth: We can free up billions of additional

dollars for next-generation technologies without collecting an extra dime from the American people.

A student-centered approach would produce big results. For instance, ending subsidies for voice

telephony and other legacy services would free up an extra $600 million a year for broadband.

And simplifying the program would end what I’ve called the “red-tape funding gap” and produce

another $400 million a year. You see, on average, we’ve been collecting about $400 million more for the

E-Rate program each year than actually goes out the door. Why? Applicants make bureaucratic missteps

or miss deadlines so disbursements are blocked. As a result, billions of dollars have accumulated in the

E-Rate account. That’s money from American consumers’ pockets that is just sitting on the table. By

simplifying the program, in part through a per-student model with its single-page application, we can

close the red-tape funding gap and push hundreds of millions of additional dollars to schools and libraries

each year.

With steps like these, my plan would increase funding for next-generation technologies for

students and patrons by more than $1 billion dollars in its first year.

And I’m not the only one who argues we can substantially increase funding for broadband

without taking more money from the American people. Chairman Wheeler put it well earlier this year

when he said that “the FCC has a fiduciary responsibility to both rate-payers who contribute to the

program and to students who rely on it to first assure that every E-Rate dollar is finding its highest and

best use. So here we must deal with a key reality. Simply sending more money to the E-Rate program to

keep doing business as it has been for the last 18 years is not a sustainable strategy.”

I agree. So let’s work together across party lines. Let’s modernize the E-Rate program so that

each dollar finds it highest and best use. Let’s simplify the program. Let’s focus funding on broadband.

Let’s distribute money more fairly and predictably. Let’s be more transparent so the American people

can easily see whether we are meeting these goals and can hold us accountable if we are not.

And let’s

end the incentives for wasteful spending.

You never know if and when we’ll have another window of opportunity for reform. After all, E-

Rate hasn’t been substantially revised for almost two decades. So we should treat this as the FCC’s

chance to get this right. And by “we,” I don’t just mean the Beltway-bound. From Principal Robledo in

Los Angeles to Library Director Johns in Sioux Falls, so many across the nation are counting on us to

think and do big things.

I look forward to working with my colleagues in the weeks ahead and to meeting Americans’

expectations by creating a student-centered E-Rate program.

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