[Federal Register Volume 84, Number 31 (Thursday, February 14, 2019)]
[Proposed Rules]
[Pages 4035-4039]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-02292]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 1

[WC Docket Nos. 19-2 and 13-184; FCC 19-5]


E-Rate Program Amortization Requirement, Modernizing the E-Rate 
Program for Schools and Libraries

AGENCY: Federal Communications Commission.

ACTION: Proposed rule.

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SUMMARY: In this document, the Federal Communications Commission 
(Commission) proposes to eliminate the E-Rate amortization requirement, 
which requires E-Rate applicants to amortize over three years upfront, 
non-recurring category one charges of $500,000 or more. Through this 
measure, the Commission seeks to further the Commission's goal of 
closing the digital divide by facilitating and promoting increased 
broadband infrastructure deployment to our nation's schools and 
libraries.

DATES: Comments are due on or before March 18, 2019 and reply comments 
are due on or before April 1, 2019. If you anticipate that you will be 
submitting comments, but find it difficult to do so

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within the period of time allowed by this document, you should advise 
the contact listed below as soon as possible.

ADDRESSES: You may submit comments, identified by WC Docket Nos. 19-2 
and 13-184, by any of the following methods:
     Federal Communications Commission's Website: http://apps.fcc.gov/ecfs//. Follow the instructions for submitting comments.
     People with Disabilities: Contact the FCC to request 
reasonable accommodations (accessible format documents, sign language 
interpreters, CART, etc.) by email: [email protected] or phone: 202-418-
0530 or TTY: 888-835-5322.
    For detailed instructions for submitting comments and additional 
information on the rulemaking process, see the SUPPLEMENTARY 
INFORMATION section of this document.

FOR FURTHER INFORMATION CONTACT: Bryan P. Boyle, Wireline Competition 
Bureau, (202) 418-7924 or TTY: (202) 418-0484.

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Notice 
of Proposed Rulemaking (NPRM) in WC Docket Nos. 19-2 and 13-184; FCC 
19-5, adopted on January 29, 2019 and released on January 31, 2019. The 
full text of this document is available for public inspection during 
regular business hours in the FCC Reference Center, Room CY-A257, 445 
12th Street SW, Washington, DC 20554 or at the following internet 
address: https://docs.fcc.gov/public/attachments/FCC-19-5A1.pdf.

I. Introduction

    1. Schools and libraries rely on the Commission's E-Rate program to 
ensure that they can receive affordable, high-speed broadband so they 
can connect today's students with next-generation learning 
opportunities. A Commission decision in 2000 limited E-Rate's use for 
this purpose by requiring schools and libraries to amortize over three 
years upfront, non-recurring category one charges of $500,000 or more, 
which includes charges for special construction projects. This 
amortization requirement increased costs for E-Rate supported builds 
and created uncertainty for applicants about the availability of E-Rate 
funding for the second and third years of the amortization cycle. In 
2014, the Commission suspended the requirement through funding year 
2018 in order to lower these barriers to broadband infrastructure 
investment. Our experience over the past few years suggests that 
allowing the amortization requirement to be restored would decrease 
broadband investment while increasing administrative burdens, and that 
eliminating the requirement would not create a drain on E-Rate funding. 
Therefore, the Commission now proposes to eliminate the amortization 
requirement. Through these measures, the Commission seeks to further 
its goals of closing the digital divide by facilitating and promoting 
increased broadband infrastructure deployment to our nation's schools 
and libraries.

II. Notice of Proposed Rulemaking

    2. To promote the buildout and deployment of high-speed networks 
and connections on a permanent basis to unserved and underserved 
schools and libraries, including those in rural areas, the Commission 
proposes to eliminate the amortization requirement for non-recurring 
category one funding requests over $500,000, including for special 
construction, from the E-Rate program. As discussed below, our 
experience indicates that the suspension of the amortization 
requirement has encouraged the deployment of high-speed, low-cost 
broadband networks by eliminating administrative barriers and making E-
Rate funding more predictable.
    3. Based on the information before us, it appears that suspending 
the amortization requirement has: (1) Decreased administrative burdens 
associated with applying for E-Rate support; (2) allowed applicants and 
service providers to receive disbursements for the full E-Rate 
supported portion of projects sooner; and (3) reduced uncertainty 
regarding the availability of funding. Under the suspension, rather 
than filing funding requests in each year of the amortization cycle, 
applicants have had to file only a single funding request to receive E-
Rate support for a project, thereby reducing the administrative effort 
and costs associated with filing funding requests. Moreover, during the 
suspension, service providers have recouped their buildout costs in one 
funding year rather than over the three-year amortization cycle, which, 
in turn, has likely made special construction a more attractive option 
for service providers. Additionally, applicants have enjoyed more 
certainty about funding for their special construction projects, 
receiving commitments for projects upfront, rather than in a piecemeal 
fashion over three years. As a result, the suspension of the 
amortization requirement has provided applicants and service providers 
with increased certainty and predictability that E-Rate funding will be 
available for large, special construction funding requests, which has 
likely incentivized efficient investment in infrastructure, including 
the deployment of fiber.
    4. The Commission invites comment on, and evidence regarding, 
whether the amortization suspension has encouraged the deployment of 
high-speed, low-cost connections. The Commission also seeks comment on 
the effect of the amortization suspension on applicants and on USF 
expenditures. Has permitting service providers to recoup costs up front 
allowed applicants and the USF to pay less over time because service 
providers have not otherwise recouped capital costs over time through 
higher recurring charges? Would permanently eliminating the 
amortization requirement allow applicants and the USF to pay less over 
time for the same reason?
    5. If the amortization requirement were to be restored, the 
Commission expects that the increased administrative burden, delayed 
funding commitments for special construction projects due to the three-
year amortization cycle, and uncertainty around receiving funding 
commitments in the second and third years of the cycle would deter 
applicants from seeking funding for special construction. The 
Commission seeks comment on this view. The Commission also seeks 
comment on the effect of restoring the amortization requirement on 
applicants and on USF expenditures. Would applicants, particularly 
those in underserved and rural areas, be discouraged from requesting 
funding for special construction if the amortization requirement were 
to be restored? Would these applicants simply not request funding for 
any services at all? Would they be forced to seek funding for more 
costly service options, such as funding for services provided over more 
expensive legacy networks, thereby resulting in an increase in USF 
expenditures? Or would they still seek special construction funding for 
new networks, but with all buildout costs rolled into monthly recurring 
charges? What effect would this have on USF expenditures in the long 
term? Specifically, would rolling buildout charges into higher monthly 
recurring charges ultimately cause applicants and the USF to pay more 
over time? Does paying buildout charges upfront increase USF 
expenditures in the short term but decrease USF expenditures in the 
long term because it reduces monthly recurring charges? The Commission 
also seeks comment on whether an amortization requirement would 
conflict with the economic realities of special construction projects.

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Would requiring service providers to wait several years to recover 
their investments for high sunk cost, low marginal cost undertakings 
such as special construction make them less likely to build out to 
unserved areas? If applicants were forced to amortize certain special 
construction projects, would service providers have to seek financing 
for part of the project, and would that increase the overall cost of 
the project?
    6. Further, over the four funding years of the suspension, it 
appears the concern that one-time charges would create a drain on the 
Fund has not materialized. To the contrary, funding requests from 
funding years 2015 through 2017 that would have been amortized if the 
requirement had been in place represented less than 5% of all E-Rate 
funding commitments during that period. Going forward, the Commission 
does not expect that allowing all funding associated with a special 
construction project to be paid out in one funding year, rather than 
over the course of three funding years, would divert funding from other 
services, as demand for E-Rate funding was typically under the cap from 
funding years 2015 through 2018, and there is no indication that there 
will be a significant increase in demand for future funding years.
    7. Are commenters nevertheless concerned that large special 
construction funding requests could deplete all E-Rate funds available 
under the cap and leave insufficient funding available for category two 
services? If so, the Commission seeks data to support commenters' 
concerns. And to the extent that commenters believe that large special 
construction funding requests could create a drain on E-Rate funding, 
how would requiring amortization of such requests alleviate this 
concern? In particular, even if demand were to approach the E-Rate 
funding cap, the Commission does not believe that requiring 
amortization for large, upfront category one funding requests would 
necessarily alleviate this problem because requiring amortization would 
not reduce the amount of funding requested--it would simply spread out 
the amount of funding provided over a minimum of three years. While 
this approach could mitigate the impact of a one-year surge in demand 
for special construction, it would not mitigate problems that a 
consistent increase in demand would create. Are there better ways to 
mitigate any drain on E-Rate funding caused by large, upfront requests 
for category one funding other than requiring amortization?
    8. To the extent that commenters disagree with our proposal to 
permanently eliminate the amortization requirement, they should explain 
why and provide supporting data. What are the benefits, if any, of 
reinstating the amortization requirement for funding year 2020 and 
beyond, and how do those benefits outweigh the costs of the 
amortization requirement? Are there problems that resulted from the 
amortization suspension that the Commission has not identified?

III. Procedural Matters

    9. Paperwork Reduction Act. The NPRM may result in revised 
information collection requirements. If the Commission adopts any 
revised information collection requirement, the Commission will publish 
a notice in the Federal Register inviting the public to comment on the 
requirement, as required by the Paperwork Reduction Act of 1995, Public 
Law 104-13 (44 U.S.C. 3501-3520). In addition, pursuant to the Small 
Business Paperwork Relief Act of 2002, Public Law 107-198, see 44 
U.S.C. 3506(c)(4), the Commission seeks specific comment on how it 
might ``further reduce the information collection burden for small 
business concerns with fewer than 25 employees.''
    10. Initial Regulatory Flexibility Analysis. As required by the 
Regulatory Flexibility Act of 1980, as amended (RFA), the Commission 
has prepared this Initial Regulatory Flexibility Analysis (IRFA) of the 
possible significant economic impact on a substantial number of small 
entities by the policies and rules proposed in this Notice of Proposed 
Rulemaking (NPRM). Written comments are requested on this IRFA. 
Comments must be identified as responses to the IRFA and must be filed 
by the deadlines for comments on the NPRM. The Commission will send a 
copy of the NPRM, including this IRFA, to the Chief Counsel for 
Advocacy of the Small Business Administration (SBA). In addition, the 
NPRM and IRFA (or summaries thereof) will be published in the Federal 
Register.
    11. The Commission is required by Section 254 of the Communications 
Act of 1934, as amended, to promulgate rules to implement the universal 
service provisions of Section 254. On May 8, 1997, the Commission 
adopted rules to reform its system of universal service support 
mechanisms so that universal service is preserved and advanced as 
markets move toward competition. Specifically, under the schools and 
libraries universal service support mechanism, also known as the E-Rate 
program, eligible schools, libraries, and consortia that include 
eligible schools and libraries may receive discounts for eligible 
telecommunications services, internet access, and internal connections.
    12. The rule the Commission proposes in this NPRM is directed at 
streamlining the administration of the E-Rate program for applicants, 
service providers, and the Universal Service Administrative Company. 
The rule that the Commission proposes would eliminate burdens 
associated with requesting funding for special construction.
    13. The legal basis for the NPRM is contained in sections 1 through 
4, 201-205, 254, 303(r), and 403 of the Communications Act of 1934, as 
amended by the Telecommunications Act of 1996, 47 U.S.C. 151 through 
154, 201 through 205, 254, 303(r), and 403.
    14. The RFA directs agencies to provide a description of and, where 
feasible, an estimate of the number of small entities that may be 
affected by the proposed rules, if adopted. The RFA generally defines 
the term ``small entity'' as having the same meaning as the terms 
``small business,'' ``small organization,'' and ``small governmental 
jurisdiction.'' In addition, the term ``small business'' has the same 
meaning as the term ``small business concern'' under the Small Business 
Act. A small business concern is one that: (1) Is independently owned 
and operated; (2) is not dominant in its field of operation; and (3) 
satisfies any additional criteria established by the Small Business 
Administration (SBA).
    15. Small Businesses, Small Organizations, Small Governmental 
Jurisdictions. The Commission's actions, over time, may affect small 
entities that are not easily categorized at present. The Commission 
therefore describes here, at the outset, three broad groups of small 
entities that could be directly affected herein. First, while there are 
industry specific size standards for small businesses that are used in 
the regulatory flexibility analysis, according to data from the SBA's 
Office of Advocacy, in general a small business is an independent 
business having fewer than 500 employees. These types of small 
businesses represent 99.9% of all businesses in the United States which 
translates to 28.8 million businesses.
    16. Next, the type of small entity described as a ``small 
organization'' is generally ``any not-for-profit enterprise which is 
independently owned and operated and is not dominant in its field.'' 
Nationwide, as of August 2016, there were approximately 356,494 small 
organizations based on registration and

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tax data filed by nonprofits with the Internal Revenue Service (IRS).
    17. Finally, the small entity described as a ``small governmental 
jurisdiction'' is defined generally as ``governments of cities, 
counties, towns, townships, villages, school districts, or special 
districts, with a population of less than fifty thousand.'' U.S. Census 
Bureau data from the 2012 Census of Governments indicate that there 
were 90,056 local governmental jurisdictions consisting of general 
purpose governments and special purpose governments in the United 
States. Of this number there were 37,132 General purpose governments 
(county, municipal and town or township) with populations of less than 
50,000 and 12,184 Special purpose governments (independent school 
districts and special districts) with populations of less than 50,000. 
The 2012 U.S. Census Bureau data for most types of governments in the 
local government category show that the majority of these governments 
have populations of less than 50,000. Based on this data the Commission 
estimates that at least 49,316 local government jurisdictions fall in 
the category of ``small governmental jurisdictions.''
    18. The proposal under consideration in the NPRM may, if adopted, 
result in recordkeeping requirements for both large and small entities, 
but they should be equal to or less than existing requirements.
    19. Eliminating Amortization Requirement. The Commission proposes 
to permanently eliminate the amortization requirement from the E-Rate 
program to provide applicants and service providers with increased 
certainty that E-Rate funding will be available for large, special 
construction funding requests, thereby likely incentivizing efficient 
investment in infrastructure, including deployment of fiber. The 
Commission seeks comment on whether eliminating the amortization 
requirement would increase administrative burdens for small entities.
    20. The RFA requires an agency to describe any significant, 
specifically small business, alternatives that it has considered in 
reaching its proposed approach, which may include the following four 
alternatives (among others): ``(1) the establishment of differing 
compliance or reporting requirements or timetables that take into 
account the resources available to small entities; (2) the 
clarification, consolidation, or simplification of compliance and 
reporting requirements under the rule for such small entities; (3) the 
use of performance rather than design standards; and (4) an exemption 
from coverage of the rule, or any part thereof, for such small 
entities.''
    21. In this NPRM, the Commission seeks comment on a reform to the 
E-Rate program. The Commission seeks to streamline the program rules 
and administration for applicants and service providers planning their 
E-Rate participation in future funding years. The Commission recognizes 
that its proposed rule would impact small entities. The rule the 
Commission proposes would lessen reporting burdens on small entities.
    22. Eliminating amortization requirement. By eliminating the 
amortization requirement, applicants may file a single application for 
a special construction project, rather than multiple applications over 
multiple years for the same special construction project.
    23. Compliance burdens. Implementing our proposed rule would impose 
some burden on small entities by requiring them to become familiar with 
the new rule to comply with it.
    24. Ex Parte Rules. This proceeding shall be treated as a ``permit-
but-disclose'' proceeding in accordance with the Commission's ex parte 
rules. Persons making ex parte presentations must file a copy of any 
written presentation or a memorandum summarizing any oral presentation 
within two business days after the presentation (unless a different 
deadline applicable to the Sunshine period applies). Persons making 
oral ex parte presentations are reminded that memoranda summarizing the 
presentation must (1) list all persons attending or otherwise 
participating in the meeting at which the ex parte presentation was 
made, and (2) summarize all data presented and arguments made during 
the presentation. If the presentation consisted in whole or in part of 
the presentation of data or arguments already reflected in the 
presenter's written comments, memoranda, or other filings in the 
proceeding, the presenter may provide citations to such data or 
arguments in his or her prior comments, memoranda, or other filings 
(specifying the relevant page and/or paragraph numbers where such data 
or arguments can be found) in lieu of summarizing them in the 
memorandum. Documents shown or given to Commission staff during ex 
parte meetings are deemed to be written ex parte presentations and must 
be filed consistent with rule 1.1206(b). In proceedings governed by 
rule 1.49(f) or for which the Commission has made available a method of 
electronic filing, written ex parte presentations and memoranda 
summarizing oral ex parte presentations, and all attachments thereto, 
must be filed through the electronic comment filing system available 
for that proceeding, and must be filed in their native format (e.g., 
.doc, .xml, .ppt, searchable .pdf). Participants in this proceeding 
should familiarize themselves with the Commission's ex parte rules.
    25. Pursuant to Sec. Sec.  1.415 and 1.419 of the Commission's 
rules, 47 CFR 1.415, 1.419, interested parties may file comments and 
reply comments on or before the dates indicated in the DATES section of 
this document. Comments and reply comments may be filed using the 
Commission's Electronic Comment Filing System (ECFS). See Electronic 
Filing of Documents in Rulemaking Proceedings, 63 FR 24121 (1998).
     Electronic Filers: Comments may be filed electronically 
using the internet by accessing the ECFS: http://apps.fcc.gov/ecfs/.
     Paper Filers: Parties who choose to file by paper must 
file an original and one copy of each filing. If more than one docket 
or rulemaking number appears in the caption of this proceeding, filers 
must submit two additional copies for each additional docket or 
rulemaking number.
    Filings can be sent by hand or messenger delivery, by commercial 
overnight courier, or by first-class or overnight U.S. Postal Service 
mail. All filings must be addressed to the Commission's Secretary, 
Office of the Secretary, Federal Communications Commission.
     All hand-delivered or messenger-delivered paper filings 
for the Commission's Secretary must be delivered to FCC Headquarters at 
445 12th St. SW, Room TW-A325, Washington, DC 20554. The filing hours 
are 8:00 a.m. to 7:00 p.m. All hand deliveries must be held together 
with rubber bands or fasteners. Any envelopes and boxes must be 
disposed of before entering the building.
     Commercial overnight mail (other than U.S. Postal Service 
Express Mail and Priority Mail) must be sent to 9050 Junction Drive, 
Annapolis Junction, MD 20701.
     U.S. Postal Service first-class, Express, and Priority 
mail must be addressed to 445 12th Street SW, Washington, DC 20554.
    People with Disabilities: To request materials in accessible 
formats for people with disabilities (braille, large print, electronic 
files, audio format), send an email to [email protected] or call the 
Consumer & Governmental Affairs

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Bureau at 202-418-0530 (voice), 202-418-0432 (tty).

IV. Ordering Clauses

    26. Accordingly, it is ordered that, pursuant to the authority 
found in sections 1 through 4, 201-205, 254, 303(r) and 403 of the 
Communications Act of 1934, as amended, 47 U.S.C. 151 through 154, 201 
through 205, 254, 303(r), and 403, and Sec.  1.3 of the Commission's 
rules, 47 CFR 1.3, this Notice of Proposed Rulemaking is adopted.

Federal Communications Commission.
Marlene Dortch,
Secretary.
[FR Doc. 2019-02292 Filed 2-13-19; 8:45 am]
 BILLING CODE 6712-01-P