Wheeler Proposes E-Rate Funding Increase

FCC Chairman Tom Wheeler wants to increase the funding cap for the e-rate schools and libraries program with the goal of bringing broadband to every student desktop in the country. In a briefing with reporters yesterday, Wheeler said the proposed increase, which would raise a program cap by $1.5 billion, should add no more than sixteen cents a month to consumers’ phone bills.

“Almost two-thirds of America’s schools cannot appropriately connect their students to the 21^st century,” said Wheeler. He added that rural areas and low-income areas are the most likely to lack broadband. “Failure to raise the spending cap will mean children in some communities will continue to be bypassed, particularly those in rural and low-income urban communities,” he said.

The e-rate program pays part of a school’s or library’s broadband connectivity costs. Modifications made to the program earlier this year gave priority to broadband over traditional voice and paging services and included provisions aimed at increasing the efficiency of the program and increasing transparency. At that time the FCC also specified that $1 billion of the e-rate budget would go toward Wi-Fi, a decision that was unpopular with some people who wanted to see more money go toward wide area connectivity. The new proposal, Wheeler said, would enable both types of connectivity to receive appropriate funding.

The Proposed E-Rate Funding Increase
In a fact sheet shared with reporters, Wheeler noted that:

• More than 60% of the proposed e-rate funding increase represents simply a catch-up of the lost inflation adjustment from 1997 to 2010.
• A comprehensive model from EducationSuperHighway and the Consortium for School Networking estimates the total e-rate funding needs at over $4 billion annually in some years.
• Meeting connectivity goals will require average prices to fall by 50%.

The Universal Service program is funded by long-distance carriers as a percentage of carriers’ long-distance voice revenues. With that in mind, it will be interesting to see the public reaction to Wheeler’s proposal. Increasing funding toward an educational goal would appear easier to achieve than many other types of increases; nevertheless certain groups generally oppose any increase in funding for government-run programs.

Meanwhile, other groups may be unhappy that the proposal would continue to fund broadband initiatives through a voice-focused program—an approach they say is not sustainable long term as carriers’ voice revenues decline. It’s not surprising to see Wheeler using that approach, however, as he may be reluctant to upset certain interest groups that have vociferously opposed collecting Universal Service funding based on service providers’ broadband as well as voice revenues even if the total amount collected remains the same. Those groups argue that such a move would increase broadband pricing.