Education Groups Call for FCC Action on Huge Tech Resource

Possibly billions of dollars worth of a public educational telecommunications resource has languished unused and unlicensed within the federal government for decades, some estimates show.

If it were managed more effectively, experts say, the resource could be used to essentially eliminate the “homework gap,” the divide that exists between students who have access to high-quality learning technologies in school and at home and those who don’t.

Eleven education groups—including the National Association of State Boards of Education, the National Education Association, the Consortium for School Networking, and the International Society for Technology in Education— jointly filed documents eight years ago petitioning the Federal Communications Commission to give educators access to the unlicensed remnants of the Educational Broadband Service, or EBS.

Although the FCC has been formally deliberating over what to do with the unlicensed spectrum since at least 2008, the agency has yet to issue a ruling, and the proceeding remains open—indefinitely.

The spectrum, set aside more than 50 years ago for educational television, is essentially virtual real estate regulated by the FCC, which determines who can broadcast information over which frequencies. Radio and television stations and wireless internet providers all share space on the spectrum.

Officials at the FCC, an independent federal agency, said they do not comment on open proceedings, so it remains unclear if school communities will ever get access to the unlicensed portions of the spectrum, which could be used to provide higher-speed internet connectivity to schools across the country.

Meanwhile, a close look at how the rest of the EBS is administered—the parts that have been licensed and are in use—conducted through dozens of interviews and a review of public records, suggests that the commission’s management of the existing EBS program has led to serious questions about equity.

“It’s a bad system. It’s an unfair system,” asserted James Johnston, the lawyer who filed the petition for access for the education groups. “If you make a bad decision,” he said of the FCC, “you don’t want to double down.”

Johnston’s criticism is that the EBS system has evolved in such a way that one school could be pulling in millions from the public resource every year, while another district across town might be hopelessly locked out because it was not able to get a license when the FCC was still giving them out. His proposal on behalf of the educator groups would ensure that every student would have equal access to the fruits of the unlicensed remnants of the EBS spectrum.

In the most dysfunctional cases permitted under existing rules, according to other experts, enterprising nonprofit directors are building massive, underregulated, multimillion-dollar endowments through the educational resource, again diverting the funds from needy and internet-hungry school systems.

Placing an underlying value on EBS spectrum is tricky because it has never been sold among telecoms on the open market. Putting a value on the unlicensed parts of EBS spectrum is even more complicated because it is unclear exactly what percentage of the U.S. population lives in these unlicensed “white spaces.”

Johnston estimates that the combined value of unlicensed EBS is around $4 billion, and the total value of the spectrum is around $10 billion. Sprint, which has an active presence in the space, estimates that less of the spectrum is untapped, closer to 15 percent, and has disputed Johnston’s and others’ estimates that value the spectrum so highly.

Privatization Concerns

A white paper commissioned by Sprint in 2013 suggests that EBS’s comprehensive value is about $5 billion. Former FCC commissioner Harold Furchtgott-Roth countered that year with an analysis that placed the underlying value of the spectrum between $10 billion and $18 billion.

There are currently a couple thousand FCC-issued and active EBS licenses spread out across the country. Most are clustered around population centers, and each covers around a couple hundred square miles. By law, EBS license holders must be either a public school system, an educational nonprofit, or an accredited educational institution.

License holders can use their spectrum in two ways.

One option is for the EBS-licensed organization to build a wireless broadband internet network, typically using Long Term Evolution, or LTE, internet technology. That route, while initially expensive and time-consuming, has proved effective in places like Kings County, Calif., where officials are using an EBS license to deliver affordable internet to the homes of every student in the rural district.

Recently, the cost of building those networks has come down, said Dave Maki, the chief technology officer for Northern Michigan University, which has built a successful EBS-supported wireless broadband network. He estimates that if much of the EBS spectrum were not tied up by the FCC and if the rest were not subdivided into several thousand licenses, a national wireless broadband network could be built at the cost of “half of a textbook,” or $100 to $120 per student annually—eliminating the homework gap entirely.

In the vast majority of cases, however, license holders are taking advantage of long-standing FCC rules crafted before building an independent network was cost-effective. These regulations permit license holders to lease their spectrum to private telecommunications companies for up to 30 years at a time.

Critically, however, the FCC has never attached any strings to how EBS lease revenue is used.

In choosing between building their own telecom network or renting out their spectrum for millions annually—with the sweetener being that the telecom renting the spectrum promises to beef up coverage in the immediate area—almost all license holders have found ways to strike a deal.

While experts argue over whether districts are getting a fair value for the spectrum they are leasing, one dynamic is clear: A massive amount of public educational spectrum has been privatized in recent years as telecommunications companies leased spectrum belonging to educational organizations.

Sprint’s Investments

Sprint, in particular, has major investments in educational spectrum.

It is by far the largest telecom active in the space. Todd Gray, a lawyer who represents hundreds of EBS license holders, called the carrier “the 800-pound gorilla in the room.”

A Sprint spokesperson agreed that “our leased access to EBS spectrum is a critically important part of Sprint’s overall spectrum strategy.” Some experts estimate that since merging with Clearwire, Sprint has de facto control of 80 to 90 percent of licensed EBS spectrum, all of which is rented from schools and nonprofits.

From a big-picture perspective, EBS holdings account for a significant chunk of Sprint’s national network. While Sprint declined to give a specific figure, FCC filings from Verizon, and reporting from FierceWireless, a telecom-news outlet, suggest that EBS accounted for somewhere between 10 and 30 percent of Sprint’s total spectrum holdings in 2014.

Earlier this month, Sprint initiated a campaign to donate free devices and data plans to 1 million students in an effort to help bridge the homework gap.

Johnston, the lawyer who filed for the education groups, doesn’t begrudge existing EBS license holders from cashing in with Sprint. Instead, what he objects to is the fact that most school districts in the United States have no real recourse to accessing the financial or connectivity benefits that come from holding parts of the spectrum.

In the 1990’s, Congress passed legislation which forbids spectrum giveaways, requiring the FCC to hold auctions when awarding new spectrum licenses to these educational entities. The FCC, unwilling to pit public educational institutions against one another in auctions, has stopped issuing new EBS licenses since 1995.

In Phoenix, according to the FCC’s licensing database, none of the 30 public K-12 districts in the city have an EBS license. Instead, the licenses that cover nearly 4 million people in the Phoenix area are owned by groups like Arizona State University’s board of regents, the Hispanic Information and Telecommunications Network, the North American Catholic Educational Programming Foundation, and the Instructional Telecommunications Foundation.

Altogether, based on the number of people living in Phoenix, and employing a commonly used industry formula provided by Johnston, the contestants’ lawyer, the estimated value of the EBS spectrum in the city is roughly $144 million.

That means Phoenix license holders could expect to receive about $9.5 million in combined lease payments annually—with no FCC rules attached to how the money is spent.

The only K-12 institution that holds an EBS license in Phoenix is Valley Lutheran High School, a private school with 190 students.

The educator groups, through Johnston, have a solution that they argue would prevent such inequities from being repeated with the estimated billions worth of unlicensed spectrum still sitting with the FCC.

Their solution would be to establish consortia among all eligible educational institutions in every geographic service area. Each consortium would include every educational group eligible for an EBS license and interested in participating. If that standard were met, the consortium would then become the only applicant for the local spectrum license, thus circumventing the federal statutes that mandate auctions when there is more than one qualified applicant for spectrum.

The consortium could then either lease the spectrum rights to a telecom like Sprint—dividing up revenue equally on a per-student basis—or coordinate efforts to build local wireless broadband networks modeled on Kings County’s or Northern Michigan University’s efforts.

Other longtime EBS observers argue that the education groups’ proposal does not go far enough.

J.H. Snider, the president of the nonprofit iSolon.org, a small public policy advocacy group, and a former fellow at the Harvard University Edmond J. Safra Center for Ethics, said that the real tragedy of the EBS system is that most of the biggest lease owners nationally are educational nonprofits that operate in their own self-interest, at the expense of hundreds of thousands of students.

Snider was particularly critical of Jim Schwartz, who figures prominently in a complex structure of nonprofits that includes the Instructional Telecommunications Foundation, one of the few EBS holders in Phoenix.

IRS 990 forms and the FCC’s database show that Schwartz’s network of nonprofits have EBS licenses in some of the biggest markets in the country, such as Chicago, Philadelphia, and the Twin Cities in Minnesota, as well as more than $56 million in reserve as of 2014, almost all of which is derived from EBS lease payments accumulated over the years. Documents show that the nonprofits only disburse a small fraction of those funds for educational purposes, including a few modest grant programs.

Schwartz said in a telephone interview that his groups are intentionally building up an endowment in the event Sprint were to go out of business and his nonprofits would have to build their own networks to maintain their EBS licenses. “Maybe Jim [Snider] thinks there should be rules about [how EBS lease revenue gets spent], but there aren’t any rules about it right now.”

Another one of the Phoenix-area license holders, the North American Catholic Educational Programming Foundation has dozens of licenses across the country in markets such as Austin, Texas; Denver, and Palm Beach County, Fla.

Despite sitting on more than $64 million in reserves as of the group’s 2014 IRS filing, there is very limited evidence of the programming foundation’s contribution to educational media. The group’s website features a few low-budget religious videos and a handful of recorded interviews. IRS 990 forms do show that the group paid out $582,017 in charitable grants in 2014, as well as over $1.3 million in other expenses including employee compensation, while taking in over $8 million in revenue.

Katherine Messier, the group’s director, said in an emailed statement that the organization needs significant capital reserves should they need to build out Internet networks in rural areas where they hold licenses. She also said that the organization has “donated more than $1 million worth of 4G LTE modems” to schools and nonprofits in 2016.