On July 11, 2014, the FCC adopted an E-Rate Modernization Order that expands funding for Wi-Fi networks and seeks to improve overall cost effectiveness and streamline the E-Rate application process.  The Order is the culmination of a top to bottom review of the E-Rate program initiated by the FCC in November 2103 to examine how E-Rate can better serve schools and libraries, aiming for 99% of America’s students having access to high speed internet in five years.  The FCC’s Public Notice and Fact Sheet provide some details about the adopted reforms, but the full Order and accompanying Further Notice of Proposed Rulemaking (FNPRM) are not yet available.

According to the FCC, the Order takes three specific steps to achieve E-Rate Modernization goals:

• Expand funding for Wi-Fi networks.  In the first two years, $2 billion of resources will be allocated for Wi-Fi buildout through improved financial management practices.  For the remaining three years, a target of $1 billion per year will be made available through increased efficiencies and by phasing out E-rate support for older technologies.
• Increase cost effectiveness.  New measures will be implemented to ensure greater pricing transparency, incentivize bulk purchasing, and improve the enforcement process.
• Streamline the application process.  Applications will be expedited if they are small dollar and cost-effective, the application process will be streamlined, all filing will be done electronically, and efforts to combat waste, fraud, and abuse will be strengthened through document retention and site inspection rules.

The FNPRM seeks public comment and suggestion on the following issues:

• Long term program funding needs necessary to meet goals and funding targets;
• Further steps to facilitate the use of cost-effective consortium-based purchasing; and
• Alternative methodologies for allocating support for library Wi-Fi connectivity

Overall, the Commission’s Order seeks to allocate $5 billion over the next 5 years toward the deployment of Wi-Fi networks in schools.  According to the Commission, the Order will affect a 75% increase in Wi-Fi funding for rural schools and a 60% increase in Wi-Fi funding for urban schools.

It is also important to note that two Commissioners expressed dissatisfaction with the Order, claiming it gives too much authority to USAC and the Bureaus. Commissioner O’Reilly stated:

“Last and most infuriating, the item delegates so much authority to the Bureaus and USAC to do almost whatever they would like, whenever they would like to do it .. I worry this mechanism is a way to remove accountability and bury decisions that should be made more public.”

The dissenting statements highlight a recent FCC trend to cede excessive authority to fund administrators, who then create and modify rules without adhering to rulemaking requirements under the Administrative Procedure Act.  As discussed in our June 23, 2014 Client Advisory, one recent example involves the Telecommunications Relay Services (TRS) Administrator’s attempt to expand TRS contributions to statutorily exempt “private service providers.”  Additionally, although the Order allocates additional funds for distribution to E-Rate applicants, as the dissenting statements note, the Order postpones indefinitely any discussion of how this additional support will be funded.

If you have questions about how this Order will affect your participation in the E-Rate program, please contact Jonathan S. Marashlian at 703-714-1313 or by email: jsm@commlawgroup.com.