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How Obama's Plan for Faster Internet Could Raise Your Phone Bill How Obama's Plan for Faster Internet Could Raise Your Phone Bill

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How Obama's Plan for Faster Internet Could Raise Your Phone Bill

Obama’s school broadband plan may not add a dime to the deficit, but it could add a dime to your phone bill.


Telephone bills, which contain information for an AT&T customer, lie in a pile May 12, 2006 in Chicago, Illinois.(Scott Olson/Getty Images)

President Obama has a plan to connect 99 percent of U.S. schools to high-speed Internet within five years without adding "a dime to the deficit" and "without waiting for Congress."

It sounds too good to be true, but the administration has a trick up its sleeve: a federal program that collects fees on American phone bills and uses the revenue to fund Internet access at schools and libraries in rural and low-income areas.


The program, known as E-Rate, was created in 1996 and is administered by the Federal Communications Commission as part of the Universal Service Fund. The program is currently capped at about $2.3 billion per year, but the FCC has the power to lift the program's cap—even without congressional approval—and raise funds for it by bumping up phone fees.

Technically, the FCC is not directly responsible for the fees on U.S. phone bills. The agency requires all telecommunications companies, both wireless and landlines, to pay into USF fund, but most companies recoup that money from its customers, noted on consumers' monthly bills as the Universal Service contribution. The USF fee has already steadily risen from 9.5 to 16.4 percent since 2009 to account for inflation and growing costs from the USF's other three programs.

For now, the FCC is not currently considering new revenue for E-Rate, instead focusing on reforming the program to better spend its existing budget.


But FCC Chairman Tom Wheeler didn't rule out the possibility of a future cap raise during remarks as part of Digital Learning Day at the Library of Congress last Wednesday, and prominent Senate Democrats are asking the chairman to do just that.

"Now is the time for the FCC to take advantage of this unique opportunity—to expand and update that program and provide it the necessary support to make sure that every child is connected to the transformative power of technology," said Democratic Sen. Jay Rockefeller, one of the original authors of the E-Rate program and whose home state of West Virginia is both rural and impoverished.

E-Rate's budget and structure haven't changed much since it was created 1996, but technology has changed a lot. The FCC announced last week that it is doubling its investment in high-speed broadband in schools immediately—from $1 billion to $2 billion—mostly from unspent funds from previous years. This "down payment" is part of a long-term restructuring of the program's management and priorities over the next year to speed up the application process, increase oversight, and phase out funding for outdated technologies like dial-up Internet.

"The current E-rate program is burdensome, slow and not always focused on the right goals," Wheeler said. "As managers of the program, the FCC must improve the speed and effectiveness with which E-rate is run."


But the commission faces a mammoth task in bringing the nation's schools up to speed: Obama wants schools and libraries too have Internet 10 times as fast as their current speeds within five years.

According to the FCC, almost 50 percent of schools report the same Internet speed as most U.S. homes. But schools share that speed with hundreds of people, rather than the handful that make up a typical household.

The ConnectED initiative—the formal name for the White House school initiative—got a $2 billion boost from the FCC last week and a $750 million from the private sector, but it's unclear how far that will go.

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The White House hasn't listed a specific figure for how much its ConnectED initiative will cost, but the FCC reported last spring that schools and libraries requested more than $4.9 billion in E-Rate funding for the 2013-14 school year. The Obama administration estimates that, if the FCC decides to expand E-Rate, it could be done for less than $5 per phone line per year.

Democrats also tout the economic potential that high-speed Internet in schools could unlock by creating more demand in an already-lucrative education technology industry.

Like many Democratic spending plans, any push for expanding the program would meet stiff Republican opposition—but this time debate would go differently.

Even before Wheeler announced his reforms, top Republicans had sent a letter telling the FCC to fix the program before expanding it. And E-Rate has a legacy of waste and mismanagement due to its cumbersome application process, outdated classification system, and lack of transparency.

But if the FCC decides to expand the program, Republicans would be left with lots to bark about but nothing with which to bite. The commission would only need a majority of its five members to sign off on the increase, and with three Democrats sitting on the commission, Republicans would have little recourse to block it.

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