The Big Story: FCC scales back program that keeps students online
The Federal Communications Commission (FCC) cut funding for schools and libraries to provide Internet access to students via hotspot devices and Wi-Fi-enabled school buses. In a 2-1 party line vote this week, the FCC voted to undo a policy change that allowed schools to get students connected to the Internet beyond the classroom. The move threatens to exacerbate the digital divide, puts STEM resources further out of reach for students in underserved communities, and eliminates on-ramps for would-be participants in the startup ecosystem.
By approving the proposal from FCC Chair Brendan Carr (R) this week, the agency is eliminating subsidies in the E-Rate program—part of the broader Universal Service Fund (USF) focused on providing connectivity through schools and libraries—that schools have been using and planning to use this school year to enable students to connect to the Internet at home and on their commutes. The Commission’s sole Democrat as well as Democratic lawmakers in Congress opposed the rollback, pointing out that the change will especially harm students in low-income communities who don’t have Internet access at home and students in rural communities who need Internet connectivity to complete homework on their long commutes to and from school.
Low-income and rural communities have historically had less access to the startup ecosystem, both as founders and early talent and as users of new and innovative technologies. Programs like E-Rate help today’s students get the exposure to and experience with technology and innovation necessary to become tomorrow’s startup founders. In an op-ed and comments to lawmakers last month, Engine explained how USF supports current and would-be participants in the innovation ecosystem, especially as other federal broadband funding programs are defunded and delayed. Instead of rolling back programs to close the digital divide, policymakers should find new ways to ensure everyone can get online to participate in the innovation ecosystem and the 21st century economy.
Policy Roundup:
California enacts AI safety bill. This week, California Governor Gavin Newsom (D) signed SB 53, a measure that requires developers of the largest AI models to share their safety plans every three months and includes protections for whistleblowers. The law will add cost and uncertainty to model development, but not to the same magnitude as a previous version of the legislation, SB 1047, would have. SB 53 also includes provisions to set up a public compute resource called CalCompute, designed to advance AI research and innovation.
Congress fails to reauthorize SBIR/STTR before lapse. The authorization for the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs lapsed on September 30th, leaving the programs in limbo as agencies are no longer compelled to use previously mandated portions of their research budgets for the programs that are a critical source of non-dilutive funding for startups. While the House passed a clean, one-year extension of the programs, the Senate was unable to pass the legislation before the end of September. Congress’ failure to reauthorize the program coupled with the current government shut down is disrupting this crucial funding pipeline, impacting innovation and creating broad uncertainty in the innovation ecosystem.
Patent Office broadens AI patent eligibility. The U.S. Patent and Trademark Office’s Appeals Review Panel issued a decision last week that could make it easier for AI inventions to qualify as patent-eligible. While further examiner guidance provides clarity on patentability, preserving the current eligibility framework is critical to ensuring only high-quality patents are granted. Maintaining Section 101 protections helps shield startups from abusive patent litigation and ensures they can defend against vague and overbroad patent claims.
Government shutdown revolves around ACA subsidy disagreement. The government shutdown this week as negotiations between congressional Republicans and Democrats stalled over whether to extend an expansion of the Affordable Care Act (ACA) tax credits, which cap the cost of premiums and are used by a vast majority of the 24 million people enrolled in ACA. A disproportionate number of startup talent rely on ACA coverage, as startups often cannot offer founders and early-stage employees employer-sponsored healthcare. If the expansion is allowed to lapse at the end of 2025, millions of Americans could see their healthcare premium payments more than double, putting a crucial tool for startup founders and early employees out of reach.
On the Horizon:
WED 10/8: The Senate Commerce Committee will hold a hearing on “jawboning”—or the government using its implicit power to pressure Internet companies to remove protected speech—at 10:30 AM ET.
WED 10/8: The Senate Judiciary subcommittee on intellectual property will convene a hearing on patent eligibility at 2:30 PM ET.
Startup Roundup:
#StartupsEverywhere: Atlanta, Georgia. Carl Peterson is developing a platform to tackle the shortage of graphics processing units (GPUs) in AI development. Thunder Compute rents out space on GPUs for cheap by using software to improve GPU utilization. We sat down with Carl to discuss his company, their experience in markets abroad, and the challenge of navigating varying state rules as a small startup.
