Universal Service Fund

[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.

[Commentary] Thanks to a 2016 change in Federal Communications Commission policy, a small school district in central Virginia may have found a way to the bridge the “homework gap.” The homework gap is the lack of digital access at home that can hurt students’ academic performance and interfere with their ability to complete assignments.

Brette Arbogast, director of technology for the Appomattox County School District in Virginia, saw problems with E-Rate in 2015, in part because of a lack of competition among technology companies bidding on school business. Arbogast figured out his school district could save a lot of money if it built a network itself rather than hiring a private internet-service provider. Though the savings potentially amounted to hundreds of thousands of dollars a year, without internet access in students’ homes, the program would do nothing to address the homework gap. A recent amendment in FCC policy was a game changer. Until last year, E-Rate-funded networks could only serve the grounds of schools or libraries. In 2016 the FCC reformed the rules so that networks funded with E-Rate could reach off-campus to serve students during non-school hours. The district quickly capitalized on the change. The school district became a certified ISP and an E-Rate provider – a process that takes about a year. Once they had built the network to serve the school, they cooperated with a municipality that helped finance Wi-Fi radios, which the school connected to the network. Those Wi-Fi devices provide internet access to students in their homes after 4 p.m., thus getting them online to complete their homework.

[Craig Settles is a broadband industry analyst and consultant to local governments]

The Federal Communications Commission’s Universal Service Fund initiatives are important, complex programs that are as necessary as they are challenging to manage. The Government Accountability Office Lifeline report provides additional evidence that flaws in these programs can be used by unscrupulous actors seeking to line their own pockets at the expense of taxpayers and populations truly in need; and that while the FCC’s Lifeline program is essential to those that need it, there is significant room for both improved efficiency and performance.

[Commentary] The Government Accountability Office issued a blistering report on the Federal Communications Commission’s efforts to assist low-income families. The report criticized the agency for spending $1.7 billion annually without knowing — or caring — whether any of this money actually helps narrow the digital divide. I advocated that Congress eliminate the Universal Service Fund’s shady, self-funding off-budget funding mechanism and instead make it a line item in the federal budget. This would make the program more transparent and subject to greater congressional oversight, which would help reduce fraud and abuse and keep program expenses tied to a fixed budget. Overall, the GAO report points to the difficulties that the FCC has, and will continue to have, by deciding simply to extend a Reagan-era telephone subsidy to cover broadband access. Unquestionably, the government should offer assistance to low-income consumers at risk of falling on the wrong end of the digital divide. But that assistance should be designed from the ground up, tailored to the needs of the population it seeks to serve, with controls to protect against fraud and abuse. As we have argued before, Lifeline needs revolutionary, not evolutionary, change.

[Lyon is an associate professor at Boston College Law School]

In its analysis of data from 2012 through 2014, the Government Accountability Office was unable to confirm the eligibility of 30 percent of Lifeline users it examined. Opponents hail this finding as proof of widespread fraud. However, the GAO didn’t determine that these individuals were ineligible; it was simply unable to verify whether providers had complied with eligibility guidelines. The GAO also conducted undercover investigations, submitting a total of 21 Lifeline applications using false information and fabricated supporting documents. Investigators were able to secure service from 12 of the 19 Lifeline providers. Notably, the GAO underscored that the tests were “for illustrative purposes to highlight any potential internal control vulnerabilities and are not generalizable.”

Although investigators were able to leverage their expertise to deceive certain Lifeline providers, the GAO itself admits this effort doesn’t prove that the program is plagued by fraud. But none of that will stop Lifeline critics — including Federal Communications Commission Chairman Ajit Pai — from using the GAO report to intensify attacks on the program and malign its users. They will continue to dismiss the tremendous opportunities Lifeline has provided for millions of people — and the millions more whose lives can be improved with Lifeline’s new broadband offerings.