In a speech yesterday, President Obama proposed to reform the federal Universal Service Fund’s Schools and Libraries program (commonly referred to as the “E-rate” program. He directed the FCC to implement a program under the E-rate fund to bring high speed connectivity to 99 percent of the nation’s students within five years. The President targeted a minimum of 100 Mbps, with a goal of 1 Gbps, available to each school and library.

The bulk of the money for this reform likely would come from other savings in the USF program. If implemented, this proposal means that the USF program will not shrink -- and USF contribution rates likely will stay around their current 15-17% range -- but the share of the pie devoted to E-rate will increase.

This reform is needed in part because the E-rate program is pressing against its current cap. For the second year in a row, the FCC authorized USAC to use undisbursed funds from previous years to supplement current funding (a so-called “carry forward”). With this approval, the FY 13 E-rate program will have enough funding to meet expected Priority 1 demand (telecom and internet access services). It is not clear whether there will be enough money left over to fund Priority 2 services (internal connections and maintenance).

Obama’s announcement was met with immediate pledges of support from Acting FCC Chair Mignon Clyburn and from FCC Commissioner Jessica Rosenworcel. Obama’s proposal is similar to the “E-rate 2.0” proposal that Commissioner Jessica Rosenworcel proposed a few months ago. Commissioner Rosenworcel will be a key player in moving the proposal forward.

Obama Proposes E-rate Reform