[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]
=======================================================================
-----------------------------------------------------------------------
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.
-----------------------------------------------------------------------
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
[[Page 4036]]
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.
[[Page 4037]]
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
[[Page 4038]]
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
[[Page 4039]]
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