Bye, bye, Miss American

Commissioner Pai gave a speech at the Federal Communications Bar Association today, and he decided to talk about the E-Rate.  That's kind of surprising, since E-Rate isn't big business for lawyers, but I'm always happy to see what he has to say.

Most of the points were the same as his American Enterprise Institute speech. In spite of his call for Commissioners to "be willing to go the extra mile to forge a bipartisan agreement," it doesn't look like Commissioner Pai has moved an inch.  Since I've talked about his plan before, I'll follow my usual analytic technique of shooting my mouth off about whatever jumps out at me, ignoring the places we agree (like transparency and simplification).

Well, here's something that all the commissioners agree on: the program should toss phones and save $600 million.  What's not clear is what voice service will be tossed.  Commissioner Pai calls for defunding "stand-alone telephone service."  Does that mean cell phone service is eligible as long as it's for a smartphone that also has data access?  It sounds like Commissioner Pai wants to continue to fund voice-over-broadband, which means that the $600 million savings is illusory: schools and libraries will shift spending on voice to any voice technology that's eligible.  Since VoIP costs about the same as traditional voice, the $600 million will just be moved to a different voice technology.  It's time for the Commission to face the fact that if they want to have another $600 million available for broadband next year, they need to throw all voice services out of the program now.

[Those who think that the FCC is in the pocket of the telcos will no doubt notice that the telcos have for the past 2 years been trying to transition all their customers from traditional voice to VoIP.  Not because it's better for clients or cheaper, but because they don't want to support copper any more.  Is it coincidence that just as the telcos are trying to move away from traditional voice, the commissioners are unanimous in their intent to move the E-Rate away from traditional voice ?]

Wait, Commissioner Pai wants to "let local communities decide how funds could best be used to help local kids."  What if local communities decide that traditional voice is the best use of funds?  You can't turn the program into a block grant with a one-page application and still split hairs on what kinds of voice services will be eligible.

If the program is refocused from voice to broadband, the Siouxland Libraries would not get any E-Rate funding, because their Internet Safety Policy makes clear that the library does not filter adult computers, which makes CIPA compliance problematic.  Without CIPA, the library can only get funding for telecommunications, so Internet access is out.  And the FCC has not really made clear what the criteria are for VoIP to be purchased as a Telecommunications Service.  So if the library pays separately for WAN links, those would be eligible, but nothing else.  Want to see the Siouxland Libraries get funding?  Change the CIPA rules so that only children are protected from the Internet.  If the libraries want to give adults unfiltered access, let them do so.

In what reality is it "inside-the-Beltway advocates" that have "demanded that the Commission increase the budget"?  Read the hundreds of comments from schools and libraries that point out the need for more funding.  Try to find an applicant that recommended that the Commission keep funding flat.  And excuse me Yoda, but how does requesting an increase in funding maintain the status quo?  Wouldn't holding funding levels flat be maintaining the status quo?

I share Commissioner Pai's concern at the sharp increase in the USF.  So how about for the next 17 years, we cap all the other funds and uncap the E-Rate?  Maybe that will contain costs.

"I will not support any reform plan that boosts E-Rate’s budget."  So I guess the Commissioner's "extra mile to forge a bipartisan agreement" doesn't reach as far as considering a fund increase.

There is no “red-tape funding gap.”  Commissioner Pai's statement that "we’ve been collecting about $400 million more for the E-Rate program each year than actually goes out the door" is factually incorrect.  Here's a list of the funding caps and disbursements for the last 4 years.  Amounts are in billions.

Year	Collected	Disbursed	Difference
2009	$2.25	$1.88	$0.37
2010	$2.27	$2.28	($0.01)
2011	$2.29	$2.23	$0.06
2012	$2.34	$2.22	$0.12
2013	$2.38	$2.20	$0.18

The numbers are a little funky, since the Collected amounts are the cap for the funding year, while the Disbursed amounts (taken from USAC's 2013 Annual Report) are for the calendar year.  But it's clear: while 2009 got close to $400 million, since 2010 the average is $90 million.  And that funding is not "sitting on the table." It is rolled into future years.

Want to spend all the money collected every year?  Let applicants add new funding requests and increase the amounts on funding requests during the funding year.  The fund will operate at a deficit every year.

So instead of having $600 billion in savings by tossing traditional voice and $400 million in red-tape savings, we've got $0 billion in savings as applicants switch from tradition voice to VoIP and $90 million that we're clawing back from future rollovers.  Instead of freeing up billions of dollars, we have an opportunity to save $90 million by pulling it back from future years.

No matter how you divide up the fund, whether the current priority system or a per-student budget, there is not enough funding to pay for every school and library to get Wi-Fi to every room and 100 Mbps of broadband to every building.  Per-student funding will hide the problem, not solve it.

So Commissioner Pai and I aren't going to agree, because I, like the rest of the applicant community, recognize that the fund needs to grow.  Pai doesn't see it.