O'Rielly Grills USAC on E-Rate Overbuilding

FCC Commissioner Michael O'Rielly has asked the CEO of the Universal Service Administrative Co., which administers government telecommunications subsidies, for help in heading off potential waste in the E-rate (schools and libraries) program, specifically overbuilding of existing plans.

In a letter to CEO Chris Henderson, O'Rielly, who was named by new FCC Chairman Ajit Pai as chairman of the Federal-State Joint Board on Universal Service, said that in meetings with outside parties, his staff continues to hear concerns that universal service fund subsidies are being "wasted on overbuilding existing networks, some of which themselves are built with subsides from the USF high-cost program.

He wrote that in such cases, ratepayer dollars [from the Universal Service Fund, or USF] are going to support artificial competition.

Related: House Slates FCC Reauthorization Hearing

In his letter, O'Rielly included an article from a suburban Washington paper citing a suburban school system that planned to seek E-rate funding for a backup fiber network when there is a private company that has provided service to the schools, plus a county-operated broadband network also capable of serving the schools.

O'Rielly said he does not think that the subsidy rules allow for funding backup networks. "Instead, any universal service funding for broadband deployment should be targeted through the high-cost program to unserved communities most in need of support.

He wants the answers to a number of questions by Feb. 17, including how many applicants had sought subsidies for self-construction, how many of those would mean overbuilds, including their own networks, how USAC determines when self-construction is the most cost-effective method, and how many requests were denied because it was not the most cost-effective method.

FCC Chairman Pai has drawn some heat for withdrawing some Lifeline subsidies in part to come up with a better way to vet them for potential waste, fraud and abuse. O'Rielly backed Pai's decision.

The Lifeline program is also a USF subsidy.

John Eggerton

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.