E-Rate Issue Brief
Today’s schools are facing a heightened demand for increased broadband capacity to incorporate online
learning tools, to get students college- and career-ready, and to implement new online assessments by
2014 that many schools are not prepared to administer.
The E-Rate program has had tremendous success in helping school connect to the Internet, but
connectivity is not enough. Faster broadband Internet connections, as well as Wi-Fi connections are
needed to meet the needs of classrooms using mobile devices and of teachers integrating blended
learning tools into their classrooms that prepare students for our global economy.
In June of 2013, President Obama called to increase technology access in schools and the Administration
launched the ConnectED initiative. ConnectED, which calls for an E-Rate update, and the Federal
Communications Commission’s subsequent start of the rulemaking process to modernize E-Rate has led
to many questions from educators that want to know what to expect in the FCC E-Rate rulemaking
process. This document serves as a background tool with information of the current state of play, and
expected upcoming debates about the E-Rate program.
E-Rate Background
The E-Rate program has provided funds for public and private elementary and secondary schools, and
libraries to connect to the Internet at a discounted rate since 1996. This program is one of four funded
from the Universal Service Fund (USF), which generates revenue from fees imposed on
telecommunications service providers. E-Rate funding is capped annually at $2.25 billion (plus
inflationary increases since 2010), and discounts 20 to 90 percent of the cost of certain services for
schools and libraries. A school’s discount is determined by the number of students eligible for the
National School Lunch Program, with a small additional discount given to eligible rural schools. Schools
can apply for E-Rate funding on their own or with their school district.
The E-Rate program is divided into two different categories, which determines what services are eligible
for the subsidy:
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Priority One: digital transmission services to provide connection to a school building, Internet
access, including wireless, telephone services, including 800 numbers, long distance and
voicemail, web hosting and VOIP.
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Priority Two: commonly known as internal connections including, routers, wireless network
components, servers and basic maintenance and repair to internal systems. (To apply for this
funding, an updated school technology plan is required)
How Funding is Awarded
Requests for Priority One funding are approved starting with the applicants eligible for the highest
discount levels, which are based on a school’s poverty level and rural location, to the lowest discount
level. Any remaining funds are then awarded to Priority Two requests, starting with the highest discount
levels, until all funds are exhausted. 2012 was the first funding year in which Priority One requests alone
exceeded the E-Rate funding cap.
To apply for, and to finally receive E-Rate funding, applicants must undergo a complicated and
exhausting application process that leads to many applicants hiring E-Rate application consultants, or to
not apply at all.
The Success of E-Rate
Nearly all schools are connected to the Internet today, with E-Rate playing an important role in that
connection rate, regardless of its complex application. Generally speaking, E-Rate is extremely successful
and does not need a complete overhaul, but rather strategic updating to meet the needs of schools and
libraries to better incorporate emerging technology in their building, and to increase broadband capacity
for online student assessments.
ConnectED
The momentum to update the E-Rate Program began in June, 2013 when President Obama launched a
new initiative, called ConnectED, to connect 99 percent of students with high-capacity bandwidth within
five years. Included in the ConnectED goals is to double the funding for E-Rate over the next three years.
Notice of Proposed Rule Making (NPRM)
Following the Administration releasing their ConnectED initiative, the Federal Communications
Commission (FCC), which oversees E-Rate, has officially launched an effort to modernize the E-Rate
Program by releasing a wide-ranging Notice of Proposed Rule Making (NPRM) in July, 2013. The NPRM
covers issues ranging from E-Rate’s funding level, eligible services and the application process. Any
interested stakeholder can formally submit comments to the FCC on any portion of the nearly 200-page
NPRM by October 16, 2013. Educators are highly encouraged to submit comments to the FCC by
October 16, 2013, regardless if you have recently received E-Rate funding.
The NPRM includes three stated goals for the E-Rate Program:
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Increase high-capacity broadband;
Increase cost-effective purchasing; and
Streamline program administration
Changes are Likely: Input on the E-Rate program from the education community is critical because the
FCC has the ability to approve program changes to E-Rate, such as raising the program funding cap,
through a majority vote of the FCC Commissioners. These changes do not require any Congressional
action, which is welcome news in today’s political climate. The FCC has indicated that it is important to
receive as many comments from the education community as possible, to ensure the program continues
to best serve schools, teachers, and students at a time when federal education funding is on the decline.
There are typically five FCC Commissioners that are appointed to five-year terms, but two of the seats
are currently vacant.
NAESP Wants To Hear From You: NAEP needs to hear from principals about what is working and how
you would like to see E-Rate updated. Are you able to determine your schools broadband capacity and
typical usage rates? Does your Internet connection and network serve your needs? What prohibits your
school from investing in technology upgrades? What services does E-Rate support in your school? How
can the E-Rate application and compliance procedures be modernized to reduce program burden for
schools?
Issues Addressed by the FCC E-Rate NPRM
While the FCC has included hundreds of questions in the proposed E-Rate NPRM open for comment
through October 16, 2013, some larger issues have emerged that are likely to shape most of the debate,
which are described below.
Funding Needs: Requests for E-rate funding has exceeded the amount of available funds annually, with
demand steadily increasing. Funding for Priority One services are now so high, that little, if any funding
is available for Priority Two services. For the 2013 funding year, $4.9 billion in requests were made in
over 46,000 applications, which is more than double the amount of the annual $2.25 billion funding cap.
With one exception, Priority Two funding has been available only for recipients where at least 50
percent of the students are eligible for free or reduce price school lunch.
Because some schools know their Priority Two funding request is unlikely to be funded, particularly if
that school is not eligible for an 80 percent or higher discount rate from E-Rate, many schools do not
submit E-Rate applications. As a result, the funding need may be higher than the submitted applications
indicate.
Results from a 2010 Federal Communications Commission survey of E-Rate recipients reported that the
broadband connections of nearly 80 percent of respondents did not fully meet their needs, which is why
NAESP fully supports permanently increasing the funding cap for E-Rate to at least meet today’s
expressed demand for services.
Measuring Affordability: It is important to increase the transparency of the E-Rate program by assisting
schools to determine if they are paying the lowest cost possible for bandwidth and equipment, even in
communities that may only have one service provider. To achieve this goal, schools must know how to
track bandwidth capacity and usage, which not every school building is equipped to track.
Matching Requirement: Currently, discounts for eligible services range from 20 to 90 percent,
depending on a school’s poverty rate and location. FCC Commissioner Ajit Pai supports increasing the
matching requirement required by applicants, which could make E-Rate funding available to more
applicants. However, with years of continued reduced local, state and federal support for schools to
invest in technology upgrades, it is difficult to ask schools to increase access to high-speed broadband
Internet, while reducing financial support for the neediest schools, especially when there is general
consensus that the additional cost for many rural schools to improve their Internet connection is not
covered by the additional five percent subsidy eligible rural schools receive in E-Rate funding.
Per-Student Funding: The NPRM is seeking comments on changing the funding structure to a per pupil
formula, which could give schools more certainty on their annual funding levels, but would not take into
consideration if the funding would be sufficient to buy the services they really need, especially in rural
communities. Further, schools would not receive funding based on demand as there would be no way to
track actual demand.
Eligible Services: The FCC annually updates the eligible services list so applicants can determine what
services are eligible for E-Rate support. This list includes voice services, or telephone services, since dialup Internet connection was the norm at the time of E-Rate’s inception. As a result, some technologies
that now provide less direct education application are supported by E-Rate.
While some have suggested phasing out the legacy technologies, such as voice service, doing so raises
concerns about school safety as classroom telephones are sometimes the only direct connection to the
school office. Without E-Rate support, schools would need to cover the cost of each classroom
telephone line to maintain service. Further, such services are important in non-instructional buildings,
but may not be eligible for E-Rate support if services that strictly serve high-capacity broadband access
were prioritized.
Timing to Implement Change: If schools and libraries are contracting with telecommunications service
providers responsibly, many contracts are for 3 to 5 years, which makes implementing any reforms
before a schools’ current contract expires nearly impossible. Also, any change to the allowable services
discounted by E-Rate must be phased in over a number of years so schools and school districts can find
alternative funding sources for services they expect would no longer be discounted by E-Rate, or to
contract alternative technology services.
Remaining Technology Neutral: To provide the greatest amount of flexibility to schools, it is important
that the FCC continues to remain neutral in the specific technology purchased with E-Rate funds.
Schools are best positioned to know what they need in their classrooms, what technology upgrades and
services are available in the school community, and what purchases make the most financial sense. This
is particularly important in rural communities.