Understanding the Updated FCC E-Rate Program Requirements

The Universal Service Program for Schools and Libraries (known as the “E-rate program”) is the government’s largest educational technology program and is implemented by the Federal Communications Commission (FCC). The E-rate program helps eligible schools obtain affordable broadband (internet connection).

In July and December 2014, the FCC adopted E-rate Modernization Orders. Based on data gathered by the FCC, 63% of public schools (enrolling over 40 million students nationwide) do not have broadband connections capable of supporting modern digital learning. This connectivity gap will continue to grow as digital learning applications increase schools’ requirements for efficient connectivity. The FCC’s December order aims to ensure all schools have access to high-speed Wi-Fi networks capable of supporting individualized learning, and it adjusts the E-rate spending cap from a funding level of $2.4 billion to $3.9 billion for 2015. (See Fed. Communications Com., In the Matter of Modernizing the E-rate Program for Schools and Libraries (FCC 14-189) (Adopted Dec. 11, 2014), here.)

The FCC’s 2014 orders resulted in more equitable funding to schools for equipment needed to extend broadband access. As a tradeoff and to ensure enough money is available to meet the demand for Wi-Fi support, the FCC intends to decrease E-rate funding for voice-related services (such as telephone service, toll-free service, and Voice over IP).

Expansion of Broadband Funding

Wi-Fi and internal broadband connection services (now known as “Category 2” services) were previously funded by the E-rate program only after all telecommunication services and internet access requests were met; this arrangement left many districts without any E-rate funding for Wi-Fi services. The FCC took two steps to spread funding for Wi-Fi equipment to as many school applicants as possible.

First, the FCC’s orders limited the maximum E-rate discount on Wi-Fi services from 90% to 85% of the cost of service. These discounts are approved by the Universal Service Administrative Company (USAC), the agency that administers the FCC E-rate program. When a participating school district submits requests to the USAC for competitive bids and then selects a vendor to provide service, the district or the vendor requests reimbursement from the USAC for the approved discount rate, which ranges from 20% to 85% of the cost of service. A school’s discount rate is determined by the socioeconomic level of need and whether the school is located in an urban or rural area. (See Fed. Communication Com., Universal Service Program for Schools and Libraries (E-Rate).)

Second, the FCC capped the amount of funding a school district applicant may receive on its Wi-Fi services to $150 per student on the pre-discount cost over five years. For example, under this calculation, a school with 1,000 students that qualifies for a 60% E-rate program discount could spend up to $150,000 for Wi-Fi equipment in 2015, receiving $90,000 in discounts to offset the cost, but it would then be ineligible for further Category 2 funding for the next four years. To help smaller schools, the FCC created a funding floor of $9,200 per building. When a school with only 50 students seeks to purchase Wi-Fi equipment, the school would not be limited (by the $150 per student cap) to $7,500 for equipment. Instead, it could spend up to $9,200, which would then be offset depending on the school’s approved E-rate program discount.

This funding model ensures smaller schools can buy a minimum amount of Wi-Fi equipment. The five-year cap may also urge K-12 technology leaders to strategically purchase equipment with a five-year life cycle.

The 2014 FCC orders also expanded the services eligible for E-rate funding. Previously, schools could apply for E-rate program discounts only on the purchase or basic maintenance of Wi-Fi equipment (such as routers, switches, wireless access points); “managed Wi-Fi services” are now eligible. Under this service, a school district can request E-rate discounts for Wi-Fi providers to install and manage the district’s Wi-Fi equipment, a particular benefit to school districts that do not have a technology director. This expansion potentially changes the quality of on-campus broadband connectivity and the FCC expects it will result in more efficient use of E-rate program funding.

FCC Intends to Withhold Funding for Voice-Related Services

In an effort to focus E-rate funding toward delivering Wi-Fi services to school buildings, voice mail, paging services, and directory assistance no longer qualify for E-rate discounts in 2015. Over the next five years, the FCC intends to phase out funding for all voice-related services including telephone service, toll-free service, and voice-over IP. This change could dramatically impact school district budgets and may compel school business and IT leaders to reexamine their options for voice-related services. Although this rule change was controversial among some school leaders, and schools will have to pay more for voice-related services, FCC officials believe the savings schools realize on broadband and Wi-Fi services will help offset this cost.

Other changes to the E-rate program designed to cut cost and promote efficiency include more transparent E-rate contracts. For example, school districts will be able to see what other applicants are paying for similar services because USAC will post this information on its website. Finally, the FCC has added more rules to monitor the E-rate program for waste, fraud, and abuse. Applicants are now required to maintain qualifying documentation for 10 years and let USAC officials inspect any installations upon request. (See Fed. Communication Com., Summary of the Second E-Rate Modernization Order.)


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