At yesterday’s Open Meeting, the Commission voted to increase the E-rate cap by $1.5 billion, bringing the program’s total funding to $3.9 billion.  The funding increase was originally mentioned in July’s Notice of Proposed Rulemaking, and was strongly supported by key Democratic Commissioners.  According to the Public Notice of the action, the increase will give schools and libraries greater flexibility with building and supporting their high-speed broadband networks.  To raise sufficient funds for the increase, the Commission intends to raise the USF contribution rate.  The Public Notice estimates this increase to amount to an additional 16 cents per month on an individual consumer’s telecommunications bills, totaling nearly $1.90 per year.  Commissioner Pai decried the increase, stating that it would lead to a contribution factor of 20.3%, double the contribution factor from 2009.

In addition to raising the funding cap, the Second Report and Order and Order on Reconsideration makes several additional changes to the E-rate rules.  Most controversially, the new E-rate order will allow schools and libraries to build high-speed broadband facilities themselves, subject to a number of safeguards.  This new support will be paired with a partial match of any state-provided support for the construction of last-mile broadband facilities.  If a state provides funding to an E-rate eligible school or library to build out last-mile facilities, the E-rate program will match up to 10% of the cost of that construction.   Schools and libraries will also be eligible to receive funding for large, up-front construction costs in one year, instead of seeking funding over multiple years (as is currently required).

With regard to eligible services, the new E-rate order will apply the same funding support to dark fiber as it does to lit fiber.

Finally, the E-rate order will require carriers who receive subsidies from the universal service’s High Cost program to offer high-speed broadband services to rural schools and libraries at rates that are similar to those charged in urban areas.

The Second Report and Order and Order on Reconsideration dismisses a petition for reconsideration of the E-rate program’s 10-year document retention requirement, the immediate phase-out of voice components and the decision not to allow multi-year or conditional commitments.  The E-rate order makes further changes to the E-rate funding formula for urban and rural districts.  The definition of a “rural” area will be expanded to ensure that additional E-rate funding will be used in areas where services may be more costly.

As expected, the new E-rate order was passed on a 3-2, party-line vote.  Commissioners Clyburn and Rosenworcel praised the new funding increase, stating that it is a necessary step in closing the “digital divide.”  Commissioners Pai and O’Reilly voiced strong dissent, calling into question the need for more funding and opposing any additional charges that would be passed on to consumers of telecommunications services.