Pai Says E-Rate Negotiations With Wheeler Broken Down; Wheeler Can Go Ahead on Party-Line Vote

A major difference was that Pai believed Wheeler’s proposal has a $2.7 billion shortfall over five years. To close it, Wheeler’s office has been telling groups it planned to take up in December a proposal to increase the E-rate cap, an idea both Republicans Pai and Michael O'Rielly have publicly opposed, Berry said. When confronted, Wheeler’s staff “did not deny” the chairman plans to propose a cap increase later in the year, said Berry. The result, Pai’s statement (http://fcc.us/1mGeenj) said, will be “a post-election increase in Americans’ phone bills.”

O'Rielly did not respond to our inquiry, but an FCC official said, “I don’t think O'Reilly’s office has gotten anywhere [with Wheeler], either.” O'Rielly has publicly backed several changes, including a streamlining the application process. Democrat Mignon Clyburn was seen as supporting Wheeler’s plan, telco officials told us, although an attorney representing education groups said Clyburn hasn’t formally signed on. Clyburn’s office had no comment. Before Wheeler released details of his proposal last week (CD July 2 p2), Democrat Jessica Rosenworcel had urged more E-rate spending.

Wheeler’s “five-year plan to expand Wi-Fi to all schools and libraries puts to work up to $2 billion in reserves, cuts costs and phases down non-broadband services in order to fund the expansion,” an FCC spokesman said. “His proposal will increase Wi-Fi funding for rural schools by 75 percent and urban schools by 60 percent. Going forward, Chairman Wheeler will assess whether the long-term funding of the program meets the demand of schools and libraries for high-speed Internet access.” Wheeler met with Pai and his staff and is still considering some of his ideas, but could not consider some other “radical ideas” that would disturb the “bedrock” of the program, an FCC official said.

It’s unknown if Wheeler now has the votes to pass the proposal, but Berry said he assumes Wheeler’s staffers would not have “blown up negotiations” with Pai’s office if they didn’t think they could get the votes without Republican support. “The Chairman’s Office has no interest in seriously negotiating with the Republican Commissioners and is determined to pass this item on a party-line vote,” said Pai. “I am disappointed that this is becoming the Commission norm on high-profile items.” O'Rielly on Monday posted a blog item (http://fcc.us/1tk50Ri) saying “the solution to any E-Rate problems ... cannot simply be a blanket call to further increase overall USF spending. ... If we believe that more E-Rate spending is necessary now or in the future, then we should make the firm commitment at this moment to stabilize USF by agreeing to offset this new spending by reducing spending elsewhere. It will be very tempting to take the easy route today and leave the difficult funding consequences to a future Commission. But, that would not be real leadership or good stewardship of the American people’s trust."

E-rate Cap

A cap increase would be needed, Berry said, because Wheeler’s five-year plan - which does not now include an increase in the $2.4 billion annual E-rate cap - would devote $1 billion annually for internal connections. The first two years would be funded with $2 billion in unspent money. While Wheeler has proposed to fund Wi-Fi in the third through fifth years from money spent on such things as voice money and web hosting, and through efficiencies, Berry said Pai doesn’t believe the agency will find enough money without raising the cap. This is because Wheeler resisted Pai’s suggestions for closing the funding gap through spending reforms, Berry said.

Wheeler appeared to be still trying to line up votes for the order, and commissioners were discussing the possibility of leaving one of the debate’s stickiest questions, the level of funding, until December, said telco officials.

Commissioner Jessica Rosenworcel’s staff didn’t respond to our inquiries, and she had called for increasing E-rate spending (http://bit.ly/1qEzREG). Expect Rosenworcel to be pushing for more funding in internal FCC negotiations, said industry officials. Wheeler could ask for her support now -- in return for “some consideration” later, said a telco lawyer. Schools and libraries have been unhappy with Wheeler’s proposal, “and Rosenworcel likes to think of herself as a friend to schools and libraries,” an attorney representing high technology companies said. Rosenworcel could seek concessions for the program beneficiaries in return for her vote and seek changes later, the attorney said.

Associations representing libraries, which have been split on Wheeler’s proposal, came together Tuesday when they sent a joint letter to the FCC (http://bit.ly/1ssYCCR) saying they “strongly recommend the Commission reconsider the current proposed formula of $1.00 per square foot.” The letter was signed by the American Library Association and the Urban Libraries Council, Association for Rural & Small Libraries, Chief Officers of State Library Agencies and Public Library Association. ALA has supported Wheeler’s proposal. The ULC, represented by former FCC Chairman Reed Hundt, had opposed the $1 per square foot funding formula, saying it penalized small, crowded urban libraries. The ULC wants libraries to be funded either on a per patron basis or at $4 a square foot.

ALA in a separate filing recommended a $2.30-a-square-foot funding formula. The groups couldn’t agree on that figure but agreed to back more library funding, said Marijke Visser, American Library Association assistant director in the Office for Information Technology Policy. Hundt said that libraries are speaking with one voice could make it easier for Rosenworcel to back Wheeler’s proposal if the chairman is able to reach a compromise on library funding. An FCC spokesman declined comment on the joint letter.

Putting off a decision to raise the E-rate cap was opposed Tuesday by the National Education Association, said Mary Kusler, director-government relations. “We are worried there are lots of political unknowns between now and then. We would rather move the program improvements and funding at the same time.” Kusler continued to push for the FCC to not move ahead with a proposal that sets a cap on per-student spending the union says is too low, saying of Pai, “We hope his words help add to the caution and concern coming from educators across the country that we should not move forward on E-Rate programmatic change that will hurt the very schools and students who are in the greatest need.”