The Politics of E-rate

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Modern Times

The E-rate program looks a lot different than it did when it was first created. Born out of the Telecommunications Act of 1996, E-rate had its first funding year in 1998. As with most new programs, demand for funding was high. In fact, by the time the program turned 17 in 2014, demand had exceeded available funds in all but one year (FY1999). In the summer of 2014, at the urging of President Obama, the FCC modernized the E-rate program, implementing many significant changes. For more information on the specific changes, check out our Airheads Community post here. As a result of the two modernization orders (First Order and Second Order, the funding cap has successfully met the demand for E-rate funding years 2015, 2016 and 2017.

The Advocate

With the new administration comes a new FCC Chairman. In case you didn't know, FCC Chairman Ajit Pai is fond of quoting movies in his speeches and statements, whether approving or dissenting and even when making parody versions of Mean Tweets. Since 2012, Mr. Pai has been a critic of wasteful spending and overcomplicated bureaucracy in the E-rate program. In his statements on the two E-rate Modernization Orders, although he dissents, Pai reiterates his support of the E-rate program. That support has continued during his tenure as FCC Chairman. In his first policy speech as the new Chairman, Pai shows strong support of the Universal Service Program (of which E-rate is a part). Also, in response to a letter he received from two US Senators, Pai repeats his strong support for E-rate and his commitment to improving the program.

Money Talks

Will funding be cut? That is a question that keeps getting asked. While no one knows for certain, there are valid reasons for concern. One example is then-Commissioner Pai's dissent on the Second E-rate Modernization Order, which added $1.5 billion to the annual E-rate funding cap. In his dissent, Mr. Pai criticizes the need for additional funding, calling it a failure on the Commission's math skills, and calls to end incentives for wasteful spending by increasing the applicants matching requirement. However, even in his dissent, Pai goes on to call for increased funding to support rural and remote schools and libraries.

The First Wave

USAC announced the First Funding Wave for Funding Year 2017 on May 26, 2017, with more than $48.6 million in commitments for both Category One and Category Two services. As usual, the first funding waves heavily favored Category One commitments, with only $81,000 in Category Two commitments. Focusing on Category One first ensures that schools and libraries have funding commitments for those recurring services that start on July 1, so they can receive their discounts upfront and only have to pay for their match. Category Two funding commitments usually start getting larger in the late summer and early fall, so be on the lookout for those to hit big around August, September and October.

Back to the Future

So what does the future hold? Considering the new funding cap has successfully funded both categories of service at all discount levels since it was implemented in 2015, it is unlikely that the FCC is going to disrupt that progress, especially since Chairman Pai is on record stating that he would like to increase support for certain entities. However, we will see some changes in the processing of the applications. After USAC CEO Chris Henderson resigned, FCC Commissioner Michael O'Rielly issued a foreboding statement, essentially putting USAC on notice, suggesting that USAC's functions be contracted out, if significant and timely improvements aren't made.

Looking Forward

We may see some changes in the Eligible Services List for future funding years. While the FCC has been reluctant to add new services, in fear that funding would run out, the demand for Category Two funding has gone down for the last three years, and will likely continue to go down until the Category Two Maximum Budget is reset in 2020. Now would be a great time to consider adding services back to the eligible services list. The new eligible Category One service "Self Construct" may be at risk. Earlier this year, Commissioner O'Rielly sent a letter to USAC expressing his concern for potential waste, as some schools may be overbuilding their broadband networks, using self-construct E-rate funds.

Point Blank

If you haven't applied for any Category Two services, what are you waiting for? The 2017 application window has closed and there is a historic surplus of funding available; nearly $800 million of available funding will go unrequested this year. So how do you get your share of funding? Visit our E-rate webpage to learn more about the E-rate program, Aruba eligible products and services, and information on how to apply. Also, be sure to join our Airheads Community to connect and discuss with more than 58,500 members.