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FCC Votes 3-2 For E-Rate Reforms

The FCC voted Friday to approve controversial reforms to its E-Rate schools and libraries telecom subsidy on a straight party-line vote and over the vocal objections of the two Republicans who had problems with the substance and the process.

The FCC is migrating the subsidy from traditional non-broadband services and a focus on external broadband connections, to a focus on Wi-Fi connectivity to students.

But the item also now includes a "safety valve," added following pushback from educators, legislators and others, to assuage their concerns the FCC would wind up robbing broadband connections to the schools/libraries to pay for Wi-Fi connections to the students/patrons.

At its essence, said FCC chairman Tom Wheeler (pictured), the reform frees up $1 billion per year, "year after year after year" to get broadband to the students—Wi-Fi—moving the focus from external connections and non-broadband subsidies to things like pagers.

The FCC did not raise the cap on the E-Rate subsidy fund in Friday's item but will consider that in a further rulemaking.

That safety valve was apparently sufficient to assuage some major Hill critics on both sides of the aisle, including Sens. Ed Markey (D-Mass.) and Jay Rockefeller (D-W.Va.), who helped come up with the E-Rate program and were concerned it could fund Wi-Fi to the detriment of broadband connectivity to the schools.

Wheeler emphasized that would not be the case, but that it was important to get broadband from those outside connections to the students and teachers and library patrons who need it.

He said a major takeaway was that starting next year, 10 million kids would have Wi-Fi access that did not have it now. "That is a good day's work," he said.

The billions of dollars for Wi-Fi will come from unused monies already in the program and migration of funds from traditional services like telephones and pagers, but if in any year there is not enough to fund "priority 1" connections to the schools and provide that $1 billion for Wi-Fi, the external connections will come first. That is the safety valve, though an FCC staffer said they did not expect to need to use it.

For the next two years, funding will be calculated on a per-student basis for schools ($1.50 per student) and per-square-foot for libraries ($2.30), after which the FCC will need to vote to continue that model.

Commissioner Jessica Rosenworcel would have preferred the FCC also raise the funding cap, and said so. That led her to concur on the part where the FCC put off that decision until a further rulemaking. Rosenworcel has been a strong advocate for rebooting E-Rate to refocus it on capacity, rather than connectivity. That dates from her time as a top aide to Rockefeller.

But while Wheeler billed the E-Rate reform as a boon to students and access for the underserved, and his Democratic colleagues said it was a step in the right direction, though an imperfect one, Republicans were, well, incensed.

Commissioner Ajit Pai had already been vocal about his problems with the item, but he put an exclamation point on them at the meeting.

The issue was partly process. FCC commissioner Michael O'Rielly chastised the chairman for not negotiating with him because he was a Republican and for not accepting any of his edits on the item.

Commissioner Pai said the E-Rate item was not real reform, calling it a slapped-together, last-minute plan that broke promises, forfeited a chance at real reform, stripped schools of their procedural rights, would favor urban over rural schools, "doubled down on complexity," would leave a trail of broken promises, and depended on accounting trickery.

He said that those inside the Beltway would win, while rural areas would be left behind.

He said the application process remained complicated and the bureaucracy remained un-streamlined. In fact, he said, by increasing the data retention requirement from 5 to 10 years, the item actually increased paperwork. He referred to exceptions with qualifications that themselves had exceptions.

As to where the FCC was going to get all those billions, Pai said he had heard that the FCC was signaling to outside parties that the fund would be increased in a December vote—after the election—on the further notice that tees up questions of additional funding. Quoting from the movie Top Gun—Pai's movie and song references are legion—he suggested of the E-Rate item's billions for Wi-Fi: "your ego is writing checks your body can't cash."

Pai had process issues as well, saying the chairman had rejected his compromises and said many things were nonnegotiable as a matter of principle. "Take it or leave it party line votes have become the new normal for high-profile commission items," he said. "This is not good process, and devastating substance."

Commissioner O'Rielly was even more pointed on the process issues, saying his treatment had been unacceptable. Saying none of his edits had been accepted as he worked to be a "yes" vote on the item, he said instead he had gotten a straight no, a "goose egg," from the chairman's office. "I don’t think it is appropriate not to negotiate with me just because I am a Republican appointee," he said.

He also had many issues with the substance, including that the chairman would try to ram through an increase in the cap at a later date. He also said the new per-square-foot calculation was one of the silliest things he had ever seen. "Why not count roofing tiles, toilets, or even the surrounding trees," he snarked.

As to the process complaints, Wheeler chalked it up to strong individuals with firmly held beliefs working for a common purpose that is not affected by whether we always agree or not.

He said the commissioners had been thoroughly briefed, but that it had come down to principle. He said there was a difference between negotiating and changing principles and "we stuck with our principles."

Contributing editor John Eggerton has been an editor and/or writer on media regulation, legislation and policy for over four decades, including covering the FCC, FTC, Congress, the major media trade associations, and the federal courts. In addition to Multichannel News and Broadcasting + Cable, his work has appeared in Radio World, TV Technology, TV Fax, This Week in Consumer Electronics, Variety and the Encyclopedia Britannica.