Universal Service Fund

On June 22, 2017, Sens Jerry Moran (R-KS) and Joe Manchin (D-WV) wrote to Federal Communications Commission Chairman Ajit Pai, urging him to, "move forward with the Remote Areas Fund (RAF) to appropriately target Universal Service Fund support towards the most difficult to serve areas in our states that remain unserved."

On July 18, Chairman Pai responded by saying, " I was pleased to move forward with the bipartisan CAF Phase II Auctions Order earlier this year, which the Commission has now targeted to include extremely high-cost areas as well as the high-cost areas that were always part of the Connect America Fund. And that's why I was pleased that the Commission agreed to commence the Remote Areas Fund, which like the CAF Phase l1 Auction will employ technology-neutral rules, no later than one year after the commencement of the CAF Phase li auction."

On July 19, 2017, the Senate Commerce Committee held a hearing to examine the nominations of Ajit Pai, Jessica Rosenworcel, and Brendan Carr for seats on the Federal Communications Commission.

On March 7, President Donald Trump nominated Pai, the FCC’s current chairman, for a second five-year term ending June 30, 2021. Rosenworcel is nominated for a term that would end June 30, 2020. Carr, the current general counsel at the FCC, has actually been nominated for two terms, one expiring June 30, 2018 and the second ending June 30, 2023. Carr served as legal adviser to then-FCC Commissioner Pai for three years before Pai was named chairman and appointed Carr as general counsel.

Committee Chairman John Thune (R-SD) characterized the hearing as both an examination of the nominees and a FCC oversight hearing, “fulfilling a commitment I’ve made to hold regular, biannual oversight hearings of the Commission.” His opinions of the nominees: “In my view, the FCC will be in very good hands when all three of these nominees are confirmed.” He noted Chairman Pai’s efforts around transparency and FCC processes, network neutrality, and robocall prevention.

Sen Bill Nelson (D-FL), the committee’s ranking member, raised issues around all three nominations. Concerning Rosenworcel, he noted that she should not have been forced to step down from the FCC at the end of 2016 when the Senate failed to reconfirm her.

Sen. Nelson identified two concerns about Brendon Carr: 1) “two consecutive terms to which the Senate is being asked to confirm you would provide you with the longest single, initial period of service of any nominee to the FCC” and 2) “it is hard to recall a similar situation where someone was nominated to serve at the commission alongside, rather than to follow, their current boss.” He stressed that it is important to have commissioners who have independent voices and “ones who will fight for consumers and the public interest.” He later asked Carr to cite an issue that he and Chairman Pai disagree on – Carr failed to answer on more than one occasion. “Going forward, I’ll make my own decisions; I’ll call it the way I see it,” Carr said. “I think my record shows that I’m not a shrinking violet.” Sen. Nelson called that response “not confidence-building.”

Finally, Sen. Nelson congratulated Chairman Pai on some recent pro-consumer actions, but said, “[M]any view these most recent consumer protection actions as mere icing on what is otherwise an unpalatable cake. A cake constructed out of actions that eliminate competitive protections, that threaten dangerous industry consolidation, that make the Internet less free and less open, and that weaken critical consumer protections for those most vulnerable.”

Net Neutrality

Network neutrality and the FCC’s 2015 decision to classify broadband internet access service providers as telecommunications providers under Title II of the Communications Act were key issues for the hearing. In his opening remarks, Chairman Thune said,

“I am pleased that Chairman Pai has sought to hit the reset button on the 2015 Title II Order, because, as I have previously said, the FCC should do what is necessary to rebalance the agency’s regulatory posture under current law. I continue to believe, however, that the best way to provide long-term protections for the Internet is for Congress to pass bipartisan legislation. Two and a half years ago I put forward legislative principles and a draft bill to begin the conversation, and I stand ready and willing today to work toward finding a lasting legislative solution that will resolve the dispute over net neutrality once and for all.”

Two senators questioned the nominees about the impact of the Title II decision on broadband investment in the US. Sen. Mike Lee (R-UT) cited stats, offered by broadband providers, that investment has gone down. He took issue with a New York Times story that said investment had gone up since the 2015 order. He said that increase included foreign investment, some of which he said was spurred by the Title II disincentive to invest in the US, and that there was evidence that US infrastructure investment had declined precipitously.

On the other side was Sen. Ed Markey (D-MA) who said that almost half of the venture capital funds, or about $25 billion, invested since 2015 was in Internet-related businesses, with broadband providers investing $87 billion, the highest rate in a decade. Sen Markey said investment and job creation are high, so there is no problem that rolling back Title II or reviewing net neutrality rules would fix.

Both senators asked Chairman Pai for his take on their respective views, but the chairman's answer was cautious given that he has an open proceeding before him and comments on his proposal to roll back Title II and review the rules are still coming in. He said that evidence of decreased investment was one of his concerns, but that the FCC was testing that theory, as well as the opposite, as part of its due diligence.

E-Rate

While Rosenworcel, Carr and Chairman Pai all generally agreed on the importance of the FCC's E-rate program -- which makes broadband services more affordable for schools and libraries -- they initially refrained from an outright promise not to cut its funding. Sen. Ed Markey (D-Mass.) had to ask Rosenworcel a second time before she explicitly said she would not reduce the funding for E-rate. Neither Pai nor Carr would make that commitment.

Broadband Deployment

The three nominees were largely unanimous on measures to expedite rural broadband like “dig once” policies, which require installation of conduits for fiber-optic cable when preparing infrastructure such as roads. The policies aim to reduce cost and limit wait times for installing fiber in different municipalities.

“I think it would be helpful for ‘dig once’ policies and similar policies to be the law of the land,” Chairman Pai told Sen. Amy Klobuchar (D-MN).

“The agency, working with local jurisdictions, should try to come up with a model code — one that includes policies like ‘dig once,’” Rosenworcel said. She added that there should be incentives built in for local communities to adopt the model.

Senators also pressed the three on the need for accurate coverage maps so that subsidies issued to companies to build out their infrastructure are actually targeted to the right places.

“I would hope to get your commitment that the commission will work to ensure that mapping data used at the FCC accurately accounts for on-the-ground mobile coverage,” said Sen. Cory Gardner (R-CO). The nominees affirmed they are committed to working toward ensuring accurate data coverage moving forward.

First Amendment

Sen. Tom Udall (D-NM) pressed all of the nominees on their commitment to the First Amendment in light of the many statements President Trump has made disparaging outlets covering his Administration. Sen. Udall pointed to a story that the White House could use AT&T’s proposed acquisition of Time Warner as a way to punish CNN for its stories and suggested the Administration might want to reward Sinclair by approving Sinclair’s purchase of Tribune television stations. Each of the nominees pledged to speak out against violence or intimidation against journalists. Chairman Pai reiterated that the White House had not contacted him about retaliating against negative news stories and said he would not do so if asked. And he promised that the FCC would not be used to punish media companies or reward others and would be troubled by any attempt to pressure it to do so.

"I have not directly had any conversations with anyone in the administration with respect to media regulatory proceedings," Chairman Pai said. "To the best of my knowledge, no one on my staff or in the FCC has indirectly had any such conversations as well."

“I have consistently stated that I believe … that First Amendment freedoms, including the freedom of the press, are critical,” Pai added. “If I were ever asked by anyone in the administration to take retaliatory action, for instance, in a media regulatory proceeding, I would not do so.”

Conclusion

If all of the hearing’s nominees are confirmed by the full Senate, the FCC would have a 3-2 Republican majority. Senators on the committee have until July 21 to submit additional questions for the nominees who will be given time to reply in writing.

The LEAD Commission wants senators to put a spotlight on E-rate when it puts the spotlight on Federal Communications Commission nominees in a hearing July 19. It wants the members of the Senate Communications Subcommittee to get FCC Chairman Ajit Pai to commit to supporting the E-rate program, which subsidizes high-speed broadband to schools and libraries. The commission was created back in 2012 in response to a challenge from then FCC chairman Julius Genachowski and Department of Education secretary Arne Duncan to help technology "transform" education. “In a technology-driven, and globally competitive economy, connecting our schools and libraries with access to high-speed internet and WiFi is essential to learning and student success,” said LEAD commissioner Jim Coulter. “E-rate has been a critical part of expanding access to basic internet connectivity for students, and we strongly believe that E-rate funding should continue."

Applying for E-rate funding is not simple, especially for applicants seeking fiber-based services. Applicants must have an in-depth knowledge of dark vs. lit fiber, self-provisioning, and special construction, and that’s just the beginning. The vast majority of schools and libraries have to hire consultants to guide them through the labyrinth of E-rate rules and procedures. So the last thing we should want is to make the E-rate application even more difficult. Unfortunately, that is exactly what is happening.

E-rate fiber applications are being delayed or denied even though they follow the Federal Communications Commission’s policies, past precedent, and the Eligible Services List (ESL). As a membership organization made up of schools, libraries, associations, broadband companies and E-rate consultants, we hear these complaints constantly. The Schools Health and Libraries Broadband Coalition (SHLB) will file comments later this week on the proposed ESL for Funding Year 2018 asking to maintain the existing rules and policies governing applications for fiber-based services. The rules and policies adopted in the 2014 E-rate Modernization Orders are intended to help schools and libraries increase their bandwidth and obtain low-cost fiber services, which will be especially helpful in rural markets. We will encourage the FCC to maintain the 2014 rules and policies and to provide consistent guidance to E-rate applicants.

[Commentary] The federal E-rate program plays a critical role in allowing Kansas kids to harness the power of technology in schools and libraries. Current Federal Communications Commission Chairman Ajit Pai has voiced support for the program as a commissioner, repeatedly calling it a “program worth fighting for” and saying it has the potential to “help millions of children in America benefit from digital learning.” Of course, we agree with him on those points. However, since then, Chairman Pai has curiously refused to commit to protecting the program; retracted a progress report demonstrating E-rate’s success following its modernization; and expressed a desire to alter funding for the program in a way that would leave countless kids behind.

With Chairman Pai scheduled to testify to the Senate Commerce Committee, Sen Jerry Moran (R-KS) has an important opportunity to stand up for kids in Kansas and throughout the country. School districts like Garden City, which received $492,000 in funding in 2016 to expand access to high speed internet services thanks to E-Rate funding. We respectfully urge Sen Moran to stand up for our nation’s schools on July 19.

[James Steyer is CEO and founder of Commons Sense Kids Action]

I’m pleased to announce that August will be Rural Broadband Month at the Federal Communications Commission. Our agenda for the open meeting on August 3 will feature several items that will help bridge the digital divide.

Leading off will be a Public Notice to initiate the pre-auction process for the Connect America Fund Phase II auction. This auction will award up to $2 billion over the next decade to broadband providers that commit to offer voice and broadband services to fixed locations in unserved high-cost areas in our country. To maximize the value the American people receive for the universal service dollars we spend, this will be the first auction to award ongoing high-cost universal service support through competitive bidding in a multiple-round, reverse auction. With this Public Notice, we are seeking comment on the procedures to be used during this auction. Moving forward now will put us on track to conduct the auction in 2018.

The FCC will also consider taking the next step in implementing Phase II of another key universal service program, the Mobility Fund. In February, the Commission adopted a Mobility Fund framework to allocate up to $4.53 billion over the next decade to advance 4G LTE service, primarily in rural areas that would not be served in the absence of government support. The proposed Order on the August agenda would establish a “challenge process”—that is, a process for resolving disputes over whether areas should be eligible for Mobility Fund subsidies. This measure will allow us to proceed to a reverse auction as soon as possible. It is critical that we use accurate data to determine which areas will be included in that reverse auction. Many have complained to the FCC that the data that we currently collect through our Form 477 isn’t good enough to serve as the basis for that decision. I agree. Therefore, I am proposing to collect new and more granular data that will serve as the starting point in deciding which areas will be included in the Mobility Fund Phase II auction.

Separately, we need to do a better job collecting data through the FCC’s Form 477.

Federal Communications Commission Chairman Ajit Pai announced that the following items are tentatively on the agenda for the August Open Commission Meeting scheduled for Thursday, August 3, 2017:

1. Connect America Fund Phase II Auction (Auction 903) – The Commission will consider a Public Notice to initiate the pre-auction process for the Connect America Fund Phase II auction which will award up to $198 million annually for 10 years to service providers that commit to offer voice and broadband services to fixed locations in unserved high-cost areas. (AU Docket No. 17-182)
2. Mobility Fund Phase II Challenge Process – The Commission will consider an Order on Reconsideration and Second Report and Order that lays out a robust challenge process that will enable the Commission to direct Mobility Fund Phase II support to primarily rural areas that lack unsubsidized 4G Long Term Evolution (LTE) service. (WC Docket No. 10-90; WT Docket No.10-208)
3. Form 477 - The Commission will consider a Further Notice of Proposed Rulemaking that takes a focused look at the Commission’s Form 477 to improve the value of the data we continue to collect. (WC Docket No. 11-10)
4. Expanding Flexible Use in Mid-Band Spectrum Between 3.7 GHz and 24 GHz – The Commission will consider a Notice of Inquiry that explores opportunities for next generation services – particularly for wireless broadband – in the 3.7 GHz to 24 GHz spectrum range and asks about how we can increase efficient and effective use of this spectrum for the benefit of all services and users. (GN Docket No. 17-183)
5. Wireless License Renewal and Service Continuity Reform – The Commission will consider a Second Report and Order and Further Notice of Proposed Rulemaking that would adopt unified construction, renewal, and service continuity rules for the Wireless Radio Services, while seeking comment on a range of additional possible actions to increase the number of Americans with access to wireless communications services. (WTB Docket No. 10-112)
6. Transmitter Identification Requirements for Satellite Digital Video Uplink Transmissions – The Commission will consider a Memorandum Opinion and Order that waives the requirement that satellite news trucks, and other temporary-fixed satellite earth stations transmitting digital video, comply with the Digital Video Broadcasting-Carrier Identification (DVB-CID) standard if the earth station uses a modulator that cannot meet the DVB-CID standard through a software upgrade. (IB Docket No. 12-267)
7. Hearing Designation Order – The Commission will consider a Hearing Designation Order.
8. Enforcement Bureau Action – The Commission will consider an enforcement action.

In a letter to Universal Service Administration Company CEO Vickie Robinson, Federal Communications Commission Chairman Ajit Pai responded to a recent Government Accountability Office report on potential waste, fraud and abuse in the FCC’s Lifeline program and additional internal FCC investigations. “In light of these investigations and their findings, I believe immediate action is warranted.” He called on USAC to implement safeguards in six areas to ensure Universal Service Fund monies are not used by “unscrupulous eligible telecommunications carriers (ETCs)”:

• Audit the ten ETCs with the highest number of potential ineligible Lifeline subscribers
• Review a sampling of Lifeline subscribers each month to determine if they are eligible
• Require ETCs to verify Lifeline subscribers’ eligibility and de-enroll any subscribers who are not eligible
• Refer ETC abuses to the FCC’s Office of Inspector General for possible civil or criminal action
• For addresses with 500 or more Lifeline subscribers, require ETCs to de-enroll subscribers who cannot verify their address and confirm they are “independent economic households” from other Lifeline subscribers -- and, on a quarterly basis, review in a similar way a sampling of addresses with 25 or more subscribers
• Recapture improper payments associated with de-enrolled Lifeline subscribers
• Explore automating the process of detecting oversubscribed addresses
• Step up efforts to identify “phantom,” deceased and duplicate subscribers, de-enroll them, and prosecute ETCs who collect USF funds for serving these fictitious customers
• Require Lifeline sales agents to register with USAC, block new subscribers enrolled by sales agents who are registering too many customers, and stepping up prosecution of fraudulent sales agents.

Chairman Pai asked USAC to report to him on implementation of these safeguards by August 8, 2017.

[Commentary] Suppose you started a program to improve the reading abilities of the 80 percent of lower-income students who cannot read at grade level. This is a worthy cause, so let’s assume that you are spending more than $1 billion annually to fix this. Then someone studies the effectiveness of your program and finds: (1) The children who enroll already read at or above grade level, (2) the percentage of lower-income children reading below grade level has barely changed since you started, and (3) some of the people administering your program are stealing from it. Would you keep your program, or ditch it? If you were the Federal Communications Commission (FCC), you would probably keep it. At least, that is how the agency is treating its Lifeline program, which received another failing grade from the Government Accountability Office (GAO) in 2017.

The GAO had already given the program a failing grade seven years ago in 2010. As I have written before, a less complex, less costly, and less corruption-prone way to provide Lifeline’s income benefits would be to provide direct income subsidies to low-income households. This would save the FCC considerable time and effort that it currently devotes to patching Lifeline and would save the GAO the expense of giving the program another failing grade seven years from now.

[Mark Jamison is the Gunter Professor of the Public Utility Research Center at the University of Florida]

In this Report and Order, by eliminating several rules that are either duplicative of other reporting requirements or are simply no longer necessary, we streamline the annual reporting requirements for eligible telecommunications carriers (ETCs) that receive high-cost universal service support. We also re-emphasize the importance of providing the public with access to non-confidential information filed by ETCs, and we direct the Universal Service Administrative Company (USAC) to work closely with state and Tribal governments and other stakeholders to improve public access to the information that ETCs will continue to file. In doing so, we reduce ETCs’ regulatory burdens while strengthening the tools for program oversight in furtherance of our goal of protecting the high cost universal support program against waste, fraud, and abuse.