Wi-Fi for Some, Telephony and Hosting for None, Continued Complexity for All

While it remains difficult to “read between the lines” of the FCC’s vote to “modernize” its E-rate program since those lines (the Order) have not yet been published, there are some notable inferences that can already be drawn.

While the FCC’s new emphasis on assuring Wi-Fi funding is historic and important, it is likely that not everyone will get it from the Order.  While the FCC touts funding for Wi-Fi as a major new element of the program, funding for Wi-Fi equipment was already eligible as an internal connection.  The problem was that funding for internal connections had dried up, first for all but the 90% discount applicants, and eventually for everyone, since internal connections, as “priority two” requests, were only funded if funds remained after “priority one” telco and broadband requests had been funded.  Chairman Wheeler’s initial plan sought to change that by reserving certain funds for internal connections, which the Order will rename “category two” instead of “priority two.”  But despite the change in name, there are conflicting indications whether the FCC will actually permanently guarantee internal connection funding beyond 2016 or continue to prioritize external connections.  In any event, given that the Order is likely to spark additional interest in Wi-Fi equipment and services, that there is pent-up demand for internal connections due to the lack of 2014 funding, and that the overall demand for E-rate funding presumably will continue to grow, it appears likely that many applicants, perhaps all those at less than the 80% discount level, may be unable to receive Wi-Fi funding even in 2015. The FCC seeks to assure continued funding for internal connections by eliminating funding for telephone and web and email hosting services.  While some voice services will necessarily be retained and funded out-of-pocket (at the expense of applicants’ budgets for broadband and Wi-Fi, thus somewhat undercutting the overall purported benefits of the reform), schools and libraries will likely reduce mobile voice services and the number of telephone extensions, which could hamper access to 911 in emergencies.  The FCC’s elimination of funding for hosting will encourage applicants to use third-party services that mine student data, lack adequate privacy and security protections, and support the service through advertisements.

While it is impossible to fully evaluate the FCC’s reform at this time, it is clear that the complexity of the program is not going away.  On top of the continuation of differing rules for multiple funding categories, and competitive bidding rules, there will be new rules for consortiums, additional “lowest corresponding price” requirements for service providers, and probably more that we’ll learn when the Order is released.  There will be some welcome changes such as multi-year applications (though that appears to be more limited than we had hoped) and the elimination of the technology plan requirement (though that only applied to applicants seeking internal connections funding in the first place).  The FCC also doubled the document retention requirement from 5 years to 10 years – the need for decade-old documents is surely not a good sign for anyone hoping that “E-rate 2.0” will truly be “faster, simpler, and more efficient,” as promised last Friday by the Chairman.