7/1 FCC Comments Opposing Petition To Stifle Competition In the E-Rate Program

New America's Open Technology Institute wrote and submitted comments opposing a petition that called on the Federal Communications Commission ("Commission") to seek comment on a proposal to prevent E-Rate funds from supporting broadband networks in areas that have already been served by one provider. Access Humboldt, National Consumer Law Center, on behalf of its low-income clients, Next Century Cities, Public Knowledge, and United Church of Christ, OC Inc. signed the comments as well. The proposal would harm competition and cement the power of incumbent providers across the country, particularly in rural areas.

An introduction and summary is available below:

New America’s Open Technology Institute (OTI), Access Humboldt, National Consumer Law Center, on behalf of its low-income clients, Next Century Cities, Public Knowledge, and United Church of Christ, OC Inc. (together, “Commenters”) respectfully submit these comments in response to the Federal Communications Commission’s (Commission) Public Notice. Commenters strongly urge the Commission to reject the Petition for Rulemaking submitted by Central Texas Telephone Cooperative, Inc., Peoples Telephone Cooperative, Inc., and Totelcom Communications, LLC (“Petitioners”). The Petition makes several arguments, all of which indicate that the Commission should open a rulemaking proceeding to prohibit USF funding from ever going to the same area. Specifically, the Petition argues for adding the following requirement to Section 54.502 of the Commission’s rules: “Category One services shall not include special construction costs for the construction of fiber where it has been demonstrated that fiber already exists, unless the existing fiber owner is unwilling to negotiate in good faith to lease that fiber at reasonable market-based prices.” To make that determination, the Petitioners advocate for a 60-day challenge period for each E-Rate special construction recipient. Petitioners substantiate their claim on one specific anecdote in Texas where there is potential for Commission funding to go to a competitor that was also partially funded by USF.

As an initial matter, the Commission should consider funding both unserved and underserved areas. Preventing funding from going to the same area would disqualify certain areas from receiving any E-Rate funding once that area received USF funding. This result would limit competition in the E-Rate program, undermine the goals of the USF, contravene the public interest, and significantly harm students, schools, and libraries. Strong competition in the program fosters affordable broadband prices for schools and libraries.

The Homework Gap affects millions of American students who lack broadband access at home, and are therefore unable to complete homework assignments (which often require internet connections) and further their education with online resources. The E-Rate program combats the Homework Gap by providing affordable broadband service to qualifying schools and libraries, institutions that serve broader communities and can provide low-income Americans with a place to learn and seek career opportunities.

Precluding use of USF funds for the construction of fiber networks in areas that are already served, or to extend existing networks, would dramatically harm competition in the ERate program and give incumbents increased negotiating power to raise prices. Competition is a significant factor in the E-Rate program remaining affordable for rural schools and libraries, and this request—even if well-intentioned—threatens to foreclose the ability of any competitive provider to enter a market already served by one large provider. The Petitioners’ proposal will harm rural areas in particular, where there are likely fewer competitors in place currently.

In this case, a rulemaking is not the right way to address the situation. Petitioners argue that in one particular situation, USF funds may be used to build competing services, and then propose a sweeping rule change to address that one issue. The Petition lacks a fulsome explanation of that situation and does not make the case for its drastic response.

Moreover, the Commission has already addressed the Petitioners’ concerns. In the 2014 modernization orders, the Commission imposed a host of policies that provided safeguards to ensure E-Rate funds would be used in a cost-effective manner. It is therefore unnecessary for the Commission to take any further action.