FCC E-rate NPRM Is Met With Skepticism

The draft follows two reports making recommendations to safeguard the program from potential fraud. A 2017 FCC Office of Inspector General report recommended establishing the portal proposed in the draft, plus a 28-day holding period after closing a bidding window. A GAO audit last year also identified "opportunities to misrepresent compliance with competitive bidding requirements as an underlying fraud risk."

E-rate's competitive bidding process "has co-existed with state and local procurement laws without undue infringement" for more than 20 years, said State E-rate Coordinators’ Alliance Chair Debra Kriete in a statement: "All that would change by mandating a national bidding portal and superimposing a detailed federal procurement system of rules on E-rate. Making the program regulations so complex that applicants and service providers either decide not to participate or are denied funding for new technical infractions will undermine the valuable benefits of E-rate."

The average number of bids for internet data services has increased over the past five years from 4.2 to 5.1 per contract, Funds for Learning told staff to Chairwoman Jessica Rosenworcel in an ex parte letter posted Tuesday in docket 21-455. “The overall state of competitive bidding in K-12 schools is strong,” said CEO John Harrington: “It’s sort of the question what problem are we solving because there doesn’t seem to be one.” The FCC didn't comment Tuesday.

The FCC already has procedures in place to prevent widespread fraud, said Schools, Health & Libraries Broadband Coalition Executive Director John Windhausen. The draft NPRM is “going to create substantial confusion and potential delay in administering the E-rate program when there are financial controls already in place,” Windhausen said. It “seems like a lot of work and complexity to fix a system that seems to be working,” Harrington said, saying the FCC could increase the number of audits instead: “The program is on very strong footing today.”

The draft NPRM is potentially a “big step backwards,” said American Library Association Senior Policy Fellow Bob Bocher. It would “create another layer of complexity” in the program and require applicants to “adhere to a specific type of matrix or format in a provider’s response,” Bocher said, saying it may discourage some libraries from participating.

SECA is "already on record expressing grave concerns with the E-rate bidding portal mandate, and the draft NPRM unfortunately amplifies and does not assuage those concerns in any way," Kriete said. "We hope the agency will reconsider, table or at the very least postpone any action on this item, and consider other more constructive reforms," she said. "We stand ready to make suggestions to make the current process easier to understand and comply with, not harder."

“If the FCC and USAC [the Universal Service Administrative Company] are really going to put together a workable bidding portal, there is so much more they’ll need to figure out -- and seek additional comment on,” emailed E-Rate Central Executive Director Winston Himsworth. That includes how a federal bidding system coexists with state systems, whether the system will be “one-size-fits-all capable” of handling simple requests and extensive projects, and how the agency will administratively handle “widespread bid selection challenges” if there's increased bid transparency, Himsworth said. The portal could “[open] itself up to a lot of bidders putting in complaints,” Bocher said, which would delay funding going out the door or decisions being made.

The draft is “a conceptual document,” Himsworth said, and the eventual order resulting from the NPRM will “raise more questions than answers” that will “need to be [addressed] in system development and in additional NPRMs.” The FCC needs to ask whether the proposed changes will “discourage applicants from participating” and about the “burden that this new process would impose on applicants,” Windhausen said.