Sep 262013

The initial round of comments in the FCC’s E-Rate modernization proceeding have arrived – over 700 in all. Many comments are simple one- or two-pagers asking the FCC either to increase funding or preserve the eligibility of web-hosting and/or email. There are, however, almost 200 comments that take a deeper dive into the multitude of proposals and questions posed in the FCC’s NPRM. In this edition, we examine the comments of the nation’s two largest service providers: AT&T and Verizon.

1. Bringing Affordable Broadband to America’s Schools and Libraries.

Both AT&T and Verizon support the FCC’s efforts to bring high-speed broadband to the nation’s classrooms. AT&T recommends: (1) giving first priority to schools and libraries that have inadequate or no high-speed broadband; and (2) ensuring that applicants have adequate internal connections to effectively use broadband services.

Verizon, on the other hand, argues that the Commission needs to collect and analyze better data before implementing far-reaching changes to the E-Rate program. Verizon asks the FCC to set bandwidth goals for schools and targets for achieving those goals. Such targets would help determine where more help is needed and focus solutions accordingly. Verizon also believes that the FCC should collect bandwidth data from schools and use that data to identify areas where bandwidth goals are not being met. Only then will the Commission be able to understand the obstacles faced by particular schools and develop appropriate strategies for overcoming them.

The companies differ on whether to phase out support for traditional telephony services and basic Internet access. AT&T recommends that E-Rate funds only be used for the provision of high-speed broadband connectivity, with support for circuit-switched and TDM-based services eventually eliminated over time. Verizon instead would focus on distributing available funds more efficiently. Verizon would (1) place a per-student limit on E-Rate support; (2) revise the discount matrix to ensure that funding is targeted to the most economically-disadvantaged schools; (3) limit the use of Priority 2 funds to only the equipment necessary to transmit bandwidth within a building, and (4) phase out support for basic maintenance. Verizon prefers such tactics to eliminating support for some or all of voice services, or increasing the overall size of the E-Rate fund.

Both companies strongly believe that any proposals adopted by the Commission must be technology neutral. AT&T and Verizon oppose proposals to favor private fiber networks over other technology platforms, believing that individual schools and libraries must be able to choose the technology that best meets their high-capacity broadband needs. AT&T disagrees with the Commission’s proposal to use E-Rate money to build out private fiber networks to institutions that already have access to cost-effective broadband.

2. Maximizing the Cost Effectiveness of E-Rate Funds.

Both companies support the FCC’s efforts to increase the cost effectiveness of E-Rate funds.
AT&T supports the Commission’s proposal to encourage schools and libraries to purchase products under consortia or state contracts. Verizon, on the other hand, states that current rules already allow for consortia and bulk buying, and thus a preference for such purchasing is unnecessary. To the extent bulk buying is used, however, AT&T rejects the suggestion that prices available through bulk-buying programs should constitute the ceiling for which E-Rate support will be available.

Both companies oppose the FCC’s proposal to make bid responses and pricing information public. They argue that such a move is unnecessary and ill-advised because: (1) most pricing data is already publicly available; (2) the data is not particularly useful given the unique requirements of each service arrangement; (3) competitive bidding requirements and the Lowest Corresponding Price rule already ensure that applicants receive the lowest price charged for similarly-situated customers; and (4) the Commission should not assume responsibility for setting prices and/or price controls.

3. Streamlining Administration of the E-Rate Fund.

AT&T and Verizon support the Commission’s attempts to simplify administration of the E-Rate program. Both companies encourage the FCC to allow applicants to receive BEAR disbursements directly from USAC. AT&T would go further, however, and reform the entire funding disbursement process. AT&T identifies a number of inefficiencies and problems with the SPI invoicing method and suggests that E-Rate funds be provided directly to schools to pay for approved E-Rate products and services.

Both companies also question whether additional audit requirements are necessary. If such audits must be performed, AT&T states that applicants and service providers below a certain threshold should not be exempt.

Finally, Verizon suggests the following to further streamline the process: (1) allow parties to multi-year contracts to only go through the approval process once; (2) clarify the gift rules to allow (a) short-term market or technology trials with free or discounted pricing and (b) charitable donations as long as they are not contingent upon the purchase of E-Rate products or services. Verizon opposes (1) requiring service providers to certify compliance with state and local procurement laws; (2) increasing the complexity and burdens of the competitive bidding process; and (3) adding additional program compliance requirements such as officer signatures and longer document retention requirements.

For more information on AT&T’s and Verizon’s comments, or other comments filed in the FCC’s E-Rate modernization proceeding, please contact us by clicking on the “Visit Troy Law Group” link above.