U.S. FCC moves to reform E-Rate subsidy for Internet at schools

(Reuters) - U.S. Federal Communications Commission moved on Friday to revamp a subsidy program aimed at bringing faster Internet to schools and libraries, after President Barack Obama's plea for a swifter transition to the digital era.

The FCC voted to propose various changes to how schools apply for and spend funds from the E-Rate program; for instance ensuring that the program would prioritize investments in faster broadband connections over some older technologies it also supports.

Obama urged the FCC last month to expand the E-Rate program so that 99 percent of U.S. schools would have access to high-speed broadband and wireless Internet within five years to spur use of digital technology in the classrooms.

"Today, the Federal Communications Commission took a first, important step toward realizing our vision of making 21st century classrooms available to every student in America," Obama said in a statement on Friday.

E-Rate, created in 1997, helps schools and libraries get discounts on Internet services and digital devices.

Funded by fees Americans pay on their monthly phone bills, the program's spending has been around $2 billion a year - $2.38 billion for 2013-2014 - but demand has more than twice exceeded that amount, FCC officials say.

Schools and libraries are clamoring for faster Internet speeds to promote digital learning, which is shown to improve test scores and graduation rates. Such skills are seen as critical for the future of the U.S. economy in a world where digital is the standard for classrooms.

"We've yet to realize the full potential (of E-Rate) to transform how the education is defined," former Education Secretary Margaret Spellings told the FCC on Friday. "The program should be aligned with today's technology."

And while most experts agree on the benefits and need to modernize E-Rate, opinions differ on how to fund the reforms.

Obama's plan suggested a temporary increase in the phone bill fees that finance E-Rate for an infusion of several billion dollars while FCC Commissioner Ajit Pai has cautioned against growing the program and instead urged focus on efficiencies.

"We should be mindful that expanding the program is not the same as reform," Pai, a Republican, said on Friday.

With Friday's proposal, the FCC seeks public input on scores of issues involved in updating E-Rate, including how to maximize cost effectiveness of purchases made through the program.

Other broad goals set by the proposal include a simpler, faster process of applying for funds, with speedier FCC reviews, and focus on improving broadband capacity by phasing out support for old services such as paging.

"We are quickly moving from a world where what matters is connectivity to what matters is capacity," said FCC Commissioner Jessica Rosenworcel.

Rosenworcel, a Democrat who had worked for one of the original E-Rate authors, Senator Jay Rockefeller, has proposed setting goals for Internet speeds in U.S. classrooms: 100 megabits per student by the 2015 school year and 1 Gigabit per 1,000 students by the end of the decade.

(Reporting by Alina Selyukh in Toronto; Editing by Leslie Gevirtz)