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Synopsis of E-rate NPRM, Pt. II: Broadband Expansion

In part 2 of our NPRM analysis, we look at the Commission’s proposed expansion of broadband connectivity. By seeking comment on the expansion of program guidelines, eligibility of dark fiber and adjustments to the funding cap, the Commission is looking to increase broadband access and improve student achievement.

Flexibility of Select Broadband Services
The Commission proposes to adopt the National Broadband Plan recommendation to provide full E-rate support for wireless Internet access used with portable learning devices utilized off-premises. Currently, the eligibility of wireless Internet access under the E-rate program is restricted to on-campus use. Any use off of school grounds must be cost-allocated from a funding request. The Commission notes that the availability of wireless connectivity is linked to improved educational statistics. Citing the National Broadband Plan, the Commission emphasizes the direct correlation between broadband access and improved student achievement.

The implication of funding off-premise wireless technology begs the question of how CIPA certifications will be affected. The Commission addresses this query by advocating that the CIPA certifications should apply to services being used off-site. The Commission seeks comments regarding the need for funding recipients to have policies and programs in place so as not to violate the certifications made on the Form 486.

Were this rule to be adopted the Commission believes it would result in a higher demand for wireless technology under the E-rate program as well as an increase in funding requests for this service. To combat the increase, the FCC proposes to cap the number of wireless portable devices per school district, or adopt some other method of funding allocation.

The Commission also discusses expanding the eligible services list (ESL) to include dark fiber or unlit fiber (unused optical fiber available for lease from certain service providers). Under the current ESL, funding for unlit fiber is prohibited. Comments on the National Broadband Plan indicated that unlit fiber would be more cost-effective in many cases. Under the promulgated rules leased dark fiber would be eligible for funding under the E-rate program rules.

Expanding Broadband Access
The NPRM also focuses on expanding access to funding for residential schools serving unique populations. Under the current regulations the eligibility of internal connections is limited to service “only if it is necessary to transport information all the way to individual classrooms.” However, the Commission now appreciates the need to provide service to residential facilities that provide educational opportunities to students of a certain population. The Commission proposes to allow schools with residential facilities to receive priority one and priority two services in circumstances where the students would not have access to comparable schooling.

The Commission realizes that schools and libraries face significant constraints in broadening the bandwidth needed to service their respective populations. As such the Commission proposes developing a funding scheme that would allow E-rate dollars to be better targeted toward providing more broadband connectivity. One suggestion, as the FCC points out, would be to limit certain priority one services to lower E-rate funding priority and thereby increase the dollar amount that can be applied to higher bandwidth connectivity. Currently, the E-rate program funds all priority one requests. However, with a cap of $2.25 billion, the program is only able to fund priority two requests at a variable discount threshold depending on how much money remains after funding all priority one requests.

Priority 2 Funding Reform
The Commission is adamant that increased funding for internal connections is needed, as much of the priority two requests involve equipment requested for broadband connectivity. Reforming the way that funding is allocated for internal connections is one method in which funding could be redistributed. The FCC suggests a per student cap per school district, upon which the applicant’s discount rate would be applied. This would allow public libraries to receive the same amount of funding as the public schools in which they are located. The Commission also proposes setting aside a certain amount of funding for internal connections prior to the disbursement of priority one funding. If this rule becomes final, this would mean that the 2-in-5 rule would be virtually eliminated. The NPRM comments on the fact that the 2-in-5 rule has not served its intended purpose because it has actually limited the number of applicants actually receiving funding. The Commission seeks comments on the implications the elimination of the 2-in-5 rule would have on the program.

The Commission is also considering eliminating funding for basic maintenance, or at minimum, capping the amount available for basic maintenance. Maintenance funding requests account for roughly 15% of all priority two requests with the largest school districts receiving most of the monies. The concern here is that basic maintenance requests overwhelm the funding available for priority two internal connection requests. The FCC proposes to extend the funding more broadly to applicants for internal connections, and limit the amount of funding available for basic maintenance, by capping basic maintenance payments and reimbursing requests that are based on actual repair and maintenance costs. Additionally, the Commission seeks comments on eliminating applications for internal connections by individual school site and requiring applicants to apply for internal connections by school district.

Whether the funding for basic maintenance will be eliminated or capped at a certain amount remains to be seen. The Commission seeks comments on whether the change should be phased in over a number of funding years. The requirements for seeking basic maintenance would remain the same. The FCC also seeks comments on alternative methods to fund basic maintenance based on actual repair costs.

Adjusting for Inflation
The NPRM also discusses adjusting the total amount available for the E-rate program to inflation so that the program retains its purchasing power in current dollars. Increasing the current funding cap would allow more schools to benefit from the E-rate program with respect to priority two services. The manner in which the Commission seeks to measure the inflation adjustment would be via the gross domestic product chain-type price index (GDP-CPI) which is the same index used by the Commission to classify carrier categories for reporting and accounting purposes. However, for periods of deflation the funding cap would remain at the level from the previous funding year. The adjustment for inflation could mean that the current $2.25 billion would increase to $2.55 billion over the next five years.

A sampling of the proposed E-rate rules seeking comment can be found here.

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