Wheeler Speech Highlighted Stepped Up Enforcement on Broadband Providers’ E-rate Prices

Asked about Wheeler’s reference to the rule -- and his comment that broadband providers “can do a lot better for our nation’s schools and libraries” -- the official pointed to a provision in the July order (http://bit.ly/1pHnC7t) directing the Enforcement Bureau to “step up” efforts to enforce a Communications Act provision requiring providers to charge less than to any other nonresidential customer. The bureau was directed “to devote additional resources to investigating, and where appropriate, bringing enforcement actions against service providers who violate” the rule.

The additional emphasis would be a shift for the agency, which under prior administrations has faced criticism for not taking action against providers charging high prices (http://bit.ly/YOeS7Q), said some education advocates, who hailed the move.

While much of the attention to the E-rate modernization order (CD July 17 p5) focused on its target to devote $1 billion a year toward Wi-Fi connections in schools, a key part of the order was to bring down the prices schools and libraries pay, said the official, who highlighted another aspect of the order: a requirement to make those prices public.

Knowing what others pay will give school districts and libraries leverage to negotiate for cheaper rates, the official said, but education advocates also said it gives the agency more tools to enforce the provision of the Communications Act’s “lowest corresponding price” rule by enabling the agency to see which providers are charging unusually high rates. Making sure schools and libraries are paying lower rates benefits not only the school, the official told us, but it also would free up dollars that would benefit other schools.

"Unfortunately, until now, both [the Universal Service Administrative Agency] and the FCC’s Enforcement Bureau have not had the data and systems they need to enforce this rule,” said EducationSuperHighway CEO Evan Marwell. “As a result, there is tremendous price variability.” He said a school can pay 10 times as much for broadband connections as another in an adjacent district from the same provider.

Wheeler in the speech acknowledged schools and libraries also have a responsibility to make sure they're paying the lowest price available and the FCC needs to do better with enforcement, saying “all have a statutory responsibility to assure that the E-rate is the lowest possible rate.” The July order also “reemphasized” that providers must submit bids to applicants at prices no higher than the lowest price they charge to similarly situated nonresidential customers for similar services and charge applicants a price no higher than the lowest corresponding price.

No Evidence of Abuse

Wheeler acknowledged in the speech that prices can legitimately vary from location to location, and “there does not appear to be evidence of any systemic abuse of the lowest corresponding price requirement by service providers that would justify the need for stepped-up enforcement,” said ITTA Vice President-Regulatory Affairs Micah Caldwell in an email. AT&T and NCTA did not comment on the increased enforcement. Price information is already available in some circumstances, including E-rate applicants and service providers in state master contracts, and E-rate contracts awarded through competitive bidding or based on public tariffs and service schedules, Caldwell said. Given the “competitive state of the communications marketplace, service providers must consistently deliver the lowest corresponding price in order to secure contracts to provide E-rate services,” she said.

"Adopting a mandate or preference for fiber-based services will ignore the advent of ... potential innovations that can cost effectively deliver high-speed services to schools and libraries,” NCTA said in its reply, made available to us. The group said in some areas cable operators’ hybrid fiber coaxial (HFC) networks can meet the bandwidth needs of schools and libraries.

"By stepping up enforcement, the FCC is working to ensure that every E-rate dollar is spent as effectively as possible. Changes like this, combined with an increase in the funding for E-rate, will allow us to achieve the goal of connecting at least 99 percent of students to high speed broadband within the next five years,” said Phillip Lovell, Alliance for Excellent Education’s vice president-policy and advocacy.

In addition to urging more enforcement, Wheeler in the speech used his “bully pulpit” to urge providers to charge schools and libraries less, said National Education Association Director-Government Relations Mary Kusler. The NEA has “grave concerns,” however, about Wheeler’s emphasis on getting fiber to rural schools and libraries, Kusler said. The agency could do more to help rural schools by undoing a per-student cap on E-rate funding, which she says hurts rural areas because of the higher costs in connecting rural areas, she said. By emphasizing fiber, Wheeler was getting away from the program’s long-standing neutrality over what technology to support, and taking away from the power of local communities to determine what they need.

Encouraged by Funding Talk

Education and library groups were encouraged that Wheeler emphasized “having sufficient funding and ensuring that schools can afford the ongoing costs of accessing high-capacity broadband networks,” though a couple of advocates said he seemed to de-emphasize it by mentioning it later in the talk. More than 30 groups and companies, some of which had been divided in July over such questions as emphasizing Wi-Fi or broadband funding, sent a joint letter Tuesday at the end of the reply period on further E-rate reforms, calling for more overall funding for the program. Among those signing the letter were the Alliance for Excellent Education, the American Federation of Teachers, the American Library Association, Cisco, Common Cause, Dell, Leadership Conference on Civil and Human Rights, Microsoft, NAACP, NEA and Public Knowledge.

Telcos worried in comments earlier this month that increasing E-rate funds could endanger CAF funding (CD Sept 18 p11). NTCA had urged the agency in its comments to collect more data before making any funding decisions. NTCA “supports efforts that look to fill discrete gaps in connectivity wherever they exist, but such efforts must be targeted to the areas where such solutions are really needed,” said NTCA CEO Shirley Bloomfield in a statement Tuesday. Wheeler had mentioned taking a “close look at all of our programs” to “better incentivize buildout to rural schools and libraries” and “make it more likely that school districts and libraries will receive bids to build in areas where they currently have no high-speed options."

Those involved in the E-rate debate did not know what Wheeler has in mind. One possibility, Marwell said, is to ease rules requiring schools and libraries to pay a share of the upfront costs for broadband connections to schools. “It would go a long way” toward helping rural schools and libraries get connected “because they don’t have lots of money.” The group has also urged the agency to allow for more competition in rural areas by allowing school districts to build their own fiber, invest in dark fiber.

American Association of School Administrators Associate Executive Director Noelle Ellerson hailed Wheeler’s comment that the success of the Connect America Fund “should also be judged by how it solves the Rural Fiber Gap for rural schools and libraries.” Rural education groups, including AASA, wrote Wheeler and commissioners Sept. 10 that “rural communities have yet to realize connectivity levels comparable to those of their urban and suburban counterparts.” The groups urged the FCC to require CAF recipients to serve anchor institutions, including schools and libraries. Current CAF rules encourage recipients to confer with anchor institutions when planning CAF-supported infrastructure, but stop short “of requiring any connectivity for these customers. ... The simple switch from a suggestion to a requirement ... would represent a significant benefit to our rural communities as it relates to access to sufficient and affordable broadband services,” the groups wrote.