In a speech on June 25, 2019, FCC Commissioner Michael O’Rielly outlined his concerns about the use of E-rate funds to discount services not delivered by incumbent service providers in rural areas. He went so far as to accuse a group of Texas schools of a “scheme” that exploited a loophole in the E-rate rules. The full text of Commissioner O’Rielly’s speech is available here.

O’Rielly’s comments raise several interesting questions:
  • Should rural schools be required to use their incumbent service provider? How would this impact applicants with local bidding rules that mandate a competitive bidding process?
     
  • Should schools in rural areas be exempt from the standard E-rate competitive bidding requirements? Rather than price being the highest weighted factor, could another factor get top weighting, such as whether a local carrier receives other USF funds?
     
  • Should schools be required to consider the potential impact of a procurement on the incumbent vendor when selecting a service provider? What if local rules did not allow this type of selection process?
     
  • Should rural schools be precluded from participating in consortia? Alternatively, should consortia also be required to use incumbent providers?
     
  • When an incumbent vendor chooses not to submit a bid, is the applicant still required to consider the incumbent’s services? Does that obligation extend to non-incumbent vendors who choose not to bid?
     
  • Should incumbents be required to bid for the portion of services to be delivered in their service area, even if the overall procurement spans multiple incumbent service providers?
     
  • If the FCC requires the use of an incumbent carrier, is there a price threshold at which point an applicant could consider alternative sources of broadband?
     
  • What is the FCC’s definition of “overbuilding”? How many fiber optic cables and/or vendors does the FCC consider to be too much in a rural community?
     
  • How much cost savings for an E-rate applicant is necessary to justify the choice not to use an incumbent service?
  • Should service providers follow the local bid protest procedures as a prerequisite to submitting complaints to USAC and/or the FCC?
Applicants are encouraged share their thoughts and feedback about Commissioner O’Rielly’s proposal.