FCC Commissioner Michael O’Rielly has sent a letter to the Universal Service Administrative Company (USAC) expressing concern that USAC may have approved E-Rate funding for school districts planning to build their own fiber networks where fiber already exists. The letter asks for detailed information in response to seven questions, such as “Since the 2014 E-Rate Orders, how many applicants have requested E-Rate funding for special construction of consortium-wide WANs, and how much funding was requested by these applicants?”

In the letter, O’Rielly argued that “in addition to wasting ratepayer money, USF-supported overbuilding undermines the ability of existing network providers to bring service to unserved areas in their communities.” He said he was motivated to write the letter after learning of “certain Texas school districts” that he said were using E-Rate funding “to overbuild USF-supported providers’ fiber networks.”

O’Rielly USAC Accusations
The E-Rate program pays a portion of the cost of broadband connectivity for public schools and libraries. Traditionally, funding went toward covering the cost of purchasing connectivity from a communications service provider but for several years, schools and libraries have had the option, at least in certain cases, of using the money to deploy their own connections.

In the Texas example, O’Rielly said at least three regional-based consortia have “largely been approved” to receive more than $100 million in subsidies to deploy fiber to schools “already served by fiber networks that were themselves already partially paid for with federal funds.”

O’Rielly’s first two questions to USAC could potentially be answered with a “yes” or a “no,” although I expect USAC will elaborate beyond that.

His first question: “Does USAC understand the E-Rate rules to permit funding for special construction projects, whether self-provisioned networks or networks owned by a commercial provider, that would duplicate, in whole or in part, fiber networks that have been built using federal funds?”

His second question: “Does USAC understand the E-Rate rules to permit a consortium to receive funding for the construction of a WAN to provide internet access to the entire consortium, even where existing fiber-based providers are already capable of serving individual consortium members?”

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