February 20, 2014 - 4:34 pm
By Trent Harkrader | Associate Chief, Wireline Competition Bureau

In his recent Digital Learning Day speech, Chairman Wheeler emphasized the tremendous potential of digital learning for America’s students and teachers.  Among the reasons for the revolution going on in teaching and learning, the Chairman highlighted two transformative technological changes:  “First, inexpensive tablets turn the computer from something in the corner of the classroom (or in the computer lab down the hall), to something on each student’s desk.  Second, Wi-Fi means connecting to the Internet is no longer a function of being close enough to the plug on the wall.”

As numerous commenters have pointed out, these changes mean that as the FCC modernizes the E-rate program, we have to be thinking about getting high speed connectivity all the way to students’ desks and to open library work spaces, not just to the school or library door.  Today, a host of services -- including legacy services like long distance calling and paging -- are categorized as “priority one” services and funded before any money goes to high speed Wi-Fi in classrooms and libraries.  As a result, the existing E-rate program has been increasingly unable to meet the need for Wi-Fi funding. 

Indeed, last week USAC determined that, for the first time, there will be insufficient E-rate funding to fully support any internal connections requests from last year’s batch of applications (funding year 2013) after meeting demand for priority one services.  Although the Chairman recently announced that we are in the process of freeing very significant new funding for broadband investment, it will take some time before that funding becomes available.  And while some other “rollover” funding is available, those funds are insufficient to cover even just the 2013 internal connections applications at the top of the queue.  That’s because those applications – from just the highest poverty schools and libraries eligible for 90% discounts on equipment – totaled over $1.7 billion in funding year 2013.  Even if USAC “scraped together” every last dollar available today, only a portion (about 60%) of each of these applications could be supported.  Under today’s priority two rules, that would mean even the applicants at the top of the priority two queue would only get about 60% of their requested funds, and their required match would be more than four times larger than expected.  A large fraction of any funds committed to these applications would likely go unused, but only after extended paperwork and delay.

These numbers reveal some important concerns with the current E-rate funding structure.  It’s not just that Wi-Fi is deprioritized; it’s also that year after year, the internal connections funding that has been available has gone to the same relatively small pool of applicants.  These applicants receive preference for a good reason: they are the highest poverty schools and libraries with the greatest need. But under the current system, this small group of applicants may have insufficient incentives to seek out efficiencies or limit their requests.  Meanwhile, for all the other schools and libraries further back in line – many of which, including those in rural areas, also desperately need E-rate support for their own internal connections if our connectivity goals are to be achieved –funding levels are highly uncertain year-to-year, making it hard to budget and plan.  In funding year 2013, this dynamic finally reached a breaking point, as requests from the highest poverty schools reached their highest level in the history of the program.

As we move towards the adoption of an E-rate modernization order in calendar year 2014 and take steps to implement Chairman Wheeler’s commitment to double investment in broadband spending over the next two years, we appreciate that many E-rate applicants have questions about the impact on the funding year 2014 process.  The application window will soon close for funding year 2014, and the rules of the road are those rules that are currently in place.  The Chairman has made clear that we intend to fully fund all priority one requests.  As for priority two, we are unable to say whether and at what level such requests will be funded in funding year 2014.  Chairman Wheeler has indicated his clear interest in modernizing the program as soon as possible so that an improved E-rate program will be in place in time for the 2015 funding year.  We will strive to provide as much certainty as possible during this transitional period as the Commission moves forward with E-rate modernization and appreciate the patience of E-rate applicants during this period.   

The public notice that we plan to release in the coming weeks will seek to further develop the record on specific possible approaches to modernizing E-rate to distribute funding more equitably and predictably, and better align funding priorities with today’s broadband networks.  We’ll be counting on the continued input of stakeholders from across the E-rate landscape as we refine these proposals.  Because as the President has said, in a country where we expect free Wi-Fi with our coffee, we should definitely expect world class Wi-Fi in our schools and libraries.