“E-Rate”, which is the Schools and Libraries Fund of the Federal Universal Service Program, is a program that promotes digital learning by giving discounts to schools and libraries so that they have affordable access to high-speed broadband and telecommunications.

The E-Rate annual budget is about $4.06 billion and the program rarely stirs much controversy. However, Andrew Regitsky of CCMIHub.com reports that a group of Texas ILECs brought controversy this past May, 2019, when they filed a Petition for Rulemaking with the FCC. These rural Texas ILECs want the FCC to change E-Rates rules. They claim that, without changes, fiber networks will be overbuilt.

The petitioning party was the Central Texas Telephone Cooperative, Inc., Peoples Telephone Cooperative, Inc., and Totelcom Communications, LLC. They identify themselves collectively as the “Texas Carriers”. Their petition seeks an amendment to Part 54 of the FCC rules so that schools and libraries cannot overbuild fiber networks from E-Rate funds through the competitive bid process.

The Texas Carriers claim that a rural school or library could build more networks than necessary since they draw from multiple funding sources. The Texas Carriers see this as a potentially wasteful and redundant. They point out that overbuilding may limit available funds for other networks in other areas where new systems are of great need. As would be expected, other rural carriers supported the filing as did USTelecom which is the ILEC association.

USTelecom provided support, stating that “overbuilding is not only wasteful and an inefficient use of governmental program funds, but it also reduces the pool of funds available to rural schools and libraries that actually need fiber broadband connection.” However, the association also made the point that the Petition ignores the issues of competitive providers who are many times overbuilt with E-rate funding. Overbuilding changes cost structures for network investors and keeps the funds away from areas with deficient levels of service.

Regitsky points out that there is some inherent logic to the Petition, but that the CLEC association, known as “INCOMPAS”, thinks otherwise, and takes the position that the changes would only provide advantages to “incumbent carriers”, that is, ILECs.

INCOMPAS offers a number of arguments against the Petition. The group states that the Petition should be rejected on procedural grounds because it lacks the factual detail necessary for rulemaking. Furthermore, the Petition is unnecessary because the E-Rate program is best served by continuing to give actual competitive providers access to the bidding process. Most importantly, INCOMPAS are against the proposed change to E-Rate rules that would require E-Rate applicants to post projects on a website to be followed by a process of notifications and negotiation of fiber lease agreements with the incumbents. The group states that this would favor incumbents and would allow them to profit from E-rate without incurring expenses or making efforts to take place in such tenders.

The FCC will face the challenge of determining if overbuilding is a serious problem as the Texas Carriers have suggested, and, if it is indeed a problem: What changes would be appropriate so that schools and libraries utilize the most cost-effective networks?

For more on the subject and to read Registky’s conclusion, visit here