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.
National Journal
Laura Ryan
Feb. 11, 2014, midnight

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.

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.

{{ BIZOBJ (video: 4710) }}

What We're Following See More »
These (Supposed) Iowa and NH Escorts Tell All
30 minutes ago

Before we get to the specifics of this exposé about escorts working the Iowa and New Hampshire primary crowds, let’s get three things out of the way: 1.) It’s from Cosmopolitan; 2.) most of the women quoted use fake (if colorful) names; and 3.) again, it’s from Cosmopolitan. That said, here’s what we learned:

  • Business was booming: one escort who says she typically gets two inquiries a weekend got 15 requests in the pre-primary weekend.
  • Their primary season clientele is a bit older than normal—”40s through mid-60s, compared with mostly twentysomething regulars” and “they’ve clearly done this before.”
  • They seemed more nervous than other clients, because “the stakes are higher when you’re working for a possible future president” but “all practiced impeccable manners.”
  • One escort “typically enjoy[s] the company of Democrats more, just because I feel like our views line up a lot more.”
Restoring Some Sanity to Encryption
30 minutes ago

No matter where you stand on mandating companies to include a backdoor in encryption technologies, it doesn’t make sense to allow that decision to be made on a state level. “The problem with state-level legislation of this nature is that it manages to be both wildly impractical and entirely unenforceable,” writes Brian Barrett at Wired. There is a solution to this problem. “California Congressman Ted Lieu has introduced the ‘Ensuring National Constitutional Rights for Your Private Telecommunications Act of 2016,’ which we’ll call ENCRYPT. It’s a short, straightforward bill with a simple aim: to preempt states from attempting to implement their own anti-encryption policies at a state level.”

What the Current Crop of Candidates Could Learn from JFK
30 minutes ago

Much has been made of David Brooks’s recent New York Times column, in which confesses to missing already the civility and humanity of Barack Obama, compared to who might take his place. In, Jeffrey Frank reminds us how critical such attributes are to foreign policy. “It’s hard to imagine Kennedy so casually referring to the leader of Russia as a gangster or a thug. For that matter, it’s hard to imagine any president comparing the Russian leader to Hitler [as] Hillary Clinton did at a private fund-raiser. … Kennedy, who always worried that miscalculation could lead to war, paid close attention to the language of diplomacy.”

Hillary Is Running Against the Bill of 1992
30 minutes ago

The New Covenant. The Third Way. The Democratic Leadership Council style. Call it what you will, but whatever centrist triangulation Bill Clinton embraced in 1992, Hillary Clinton wants no part of it in 2016. Writing for Bloomberg, Sasha Issenberg and Margaret Talev explore how Hillary’s campaign has “diverged pointedly” from what made Bill so successful: “For Hillary to survive, Clintonism had to die.” Bill’s positions in 1992—from capital punishment to free trade—“represented a carefully calibrated diversion from the liberal orthodoxy of the previous decade.” But in New Hampshire, Hillary “worked to juggle nostalgia for past Clinton primary campaigns in the state with the fact that the Bill of 1992 or the Hillary of 2008 would likely be a marginal figure within today’s Democratic politics.”

Trevor Noah Needs to Find His Voice. And Fast.
1 hours ago

At first, “it was pleasant” to see Trevor Noah “smiling away and deeply dimpling in the Stewart seat, the seat that had lately grown gray hairs,” writes The Atlantic‘s James Parker in assessing the new host of the once-indispensable Daily Show. But where Jon Stewart was a heavyweight, Noah is “a very able lightweight, [who] needs time too. But he won’t get any. As a culture, we’re not about to nurture this talent, to give it room to grow. Our patience was exhausted long ago, by some other guy. We’re going to pass judgment and move on. There’s a reason Simon Cowell is so rich. Impress us today or get thee hence. So it comes to this: It’s now or never, Trevor.”