USTelecom Seeks Tight FCC Control of E-rate Self-Provisioning

One E-rate advocate said that the ILECs that USTelecom represents are reaping what they sowed by sometimes not providing schools and libraries with the high-speed broadband they need. “They’ve had their chance for 18 years, and they haven’t always done it,” Gary Rawson, chairman of the State E-Rate Coordinators’ Alliance (SECA), told us Monday. His group and other E-rate advocates are seeking various bureau clarifications -- on the electronics needed to light dark fiber, prohibited duplicative services and other topics -- to help schools and libraries navigate the application process.

The FCC in December hiked E-rate’s annual cap to $3.9 billion and expanded school and library broadband options by equalizing the treatment of lit and dark fiber and allowing applicants to self-provision broadband networks if they can show that is the most cost-effective solution and satisfy other conditions (see 1412110049). In a May public notice, the bureau sought comment on its proposed E-rate eligible service list (ESL) for funding year 2016. “The proposed ESL reflects the changes in eligibility for dark fiber, and adds explanatory ‘notes’ regarding leased lit and dark fiber and self-provisioned broadband networks,” the notice said. “The notes explain that applicants must seek competitive bids for network maintenance and operation, and all other eligible services and equipment, in order to receive E-rate support.”

USTelecom said E-rate applicants and Universal Service Administrative Co., which oversees USF programs, needed to exercise much care and scrutiny, “given the high capital costs and long commitments associated with dark fiber and self-provisioning.” Backing Unite Private Networks’ initial comments, USTelecom suggested that the wording of one ESL note “be adjusted to reflect that self-provisioning should be the option of last resort, and that it can be selected only after serious review of bids for finished and unfinished services and a thorough [Total Cost of Ownership] evaluation.” USTelecom also wants the bureau to ensure that the evaluation of dark fiber or self-provisioning provides a “complete, apples-to-apples comparison to finished services” in their totality -- “not simply a comparison to lit fiber” -- with “realistic assessments of all costs, direct and indirect.”

USTelecom said regulators must be particularly careful in evaluating applications associated with previously constructed networks not to allow parties to justify E-rate support for prior procurement decisions or to offload costs already committed by the applicant. Rather than trying to spell out long lists of ineligible services, USTelecom said, the bureau should presume that anything not on its eligible services list is ineligible for E-rate support. USTelecom urged the bureau to maintain technological neutrality, keep in mind that copper-based services may be more suitable than fiber or other new networks for some applicants, and not allow parties to secure rule changes through the ESL that should be made through petitions for reconsideration.

SECA’s Rawson said schools self-provisioned because they sometimes had no choice. He said one such school district was in Calhoun County, Mississippi, but after it requested proposals to help it build its own broadband network, two small local telcos came back with acceptable offers. In its ex parte reply to previous comments, SECA noted questions about “modulating electronics” and “equipment necessary to make a broadband service functional,” and said the bureau must precisely articulate what equipment is eligible for what type of E-rate support.

CRW Consulting said the FCC and USAC could be taking “an overly rigid approach to the duplicative services rule” regarding Internet access. In initial comments, CRW said recent E-rate applications to fund multiple connections serving the same location and population were being flagged for further review despite previous USAC interpretations that multiple connections providing necessary bandwidth weren't duplicative. CRW agreed that connections that simply provide redundancy and backup when the primary connections fail shouldn’t be funded, but it argued against assuming any secondary connection is duplicative and thus ineligible for funding. CRW urged the FCC to clarify that multiple Internet connections are eligible for funding if they are actively in use and based on the needs of the applicant.

Others agreed with CRW, including SECA, which said E-rate users sometimes sign multiyear contracts but find their bandwidth needs then increase, requiring a second connection, possibly with a different vendor that wins a competitive bid. But the E-rate application could be denied under a strict duplicative-service interpretation, SECA said. E-Rate Central's reply suggested that the FCC may need, within reason, to accept “some degree of redundancy to protect networks otherwise subject to single points of failure.”

Various parties said the bureau should clarify the E-rate treatment of firewalls and other network functions. The North Carolina Department of Public Instruction's reply agreed with Funds for Learning, which observed much confusion among equipment manufacturers, service providers, applicants and consultants regarding the eligibility of firewalls, software, and network management and monitoring functions. "In these cases, we believe that much of the confusion stems from inconsistencies in the marketplace definition and understanding of the functionality provided by these services as compared to the Commission’s (and/or USAC’s) apparent definition," Funds for Learning said in initial comments. "As a result, stakeholders acting in good faith may claim that a product or service is eligible based on their own interpretation of functionality … only to be surprised by funding denial or request for cost-allocation later in the E-rate’s Program Integrity Assurance (or worse yet, invoicing) process.”

T-Mobile said that the ESL should “provide more guidance on the amortization of Wi-Fi costs in mobile broadband cost-effectiveness demonstrations.” In initial comments, T-Mobile also said the ESL should “make clear that applicants have satisfied the cost-effectiveness showing requirement for mobile broadband if they receive no bids for a [wireless local area network] solution” and “clarify that mobile broadband services are not necessarily duplicative of a fixed broadband connection." Hewlett-Packard initial comments urged the bureau to make various ESL clarifications to better take advantage of software-defined networking that allows applicants to “future proof” their systems and lower costs.

ADS Advanced Data Services voiced concern about the FCC phasedown of E-rate support for voice services by 20 percent a year, in reply comments. But SECA’s Rawson said the full commission would have to reconsider that decision, which he didn't expect as it was part of a repositioning toward broadband and an expansion in funding.