Tech Talk Live Blog

E Rate 2.0: Big Changes on the Horizon

Aleck Johnson

​​Major changes in the rules for the much maligned and chronically underfunded E-rate program were passed by the Federal Communications Commission (FCC) this summer. These modifications will significantly change the application process of the program for local education agencies and libraries, and have longer-term budgetary implications.  Understanding these changes – and understanding how they will impact your schools, districts, or libraries – is critical to preparing for the funding year starting in 2015.

The changes in the E-rate program (dubbed “E-rate 2.0”) come largely in response to the President’s ConnectED initiative, launched back in 2013.  That initiative sought to install higher speed broadband connections in schools serving 99% of all students by 2017, so it should come as no surprise that the changes in the E-rate program place a renewed emphasis on broadband connectivity, including connectivity to the classroom.

In addition to refocusing the program on broadband, the Commission is implementing changes which they expect will lead to greater transparency and a simplified application process.  While there are a number of other changes included in the order, this article focuses on the changes in eligible services and the impact these changes will have on schools’ and libraries’ budgets.

Under the new rules, the services formerly known as Priority 1 (P1) and Priority 2 (P2) have been redubbed Category 1 (C1) and Category 2 (C2), with significant “streamlining” in the services eligible for discounts.  The streamlining in eligible services is designed to yield “savings” to the E-rate program, which will, in turn, allow the FCC to more completely fund the new Category 1 and Category 2 services.  The “streamlining” of eligible services and “savings” to the program are, however, largely a result of shifting some costs that the E-rate program has paid for the last 16 years onto the budgets of schools and libraries.

In Category 1, the new focus on broadband means that some services – notably website hosting, email hosting, and cellular data services – which were eligible under the old Priority 1 system have been eliminated entirely from eligibility for E-rate discounts starting July 1, 2015.  Other services – notably voice services, including local and long distance phone service, as well as cellular and voice over IP service – are being eliminated over the next few years (the discount rate on these services will decline 20% each year for the next 4 years, until they are eliminated from eligibility entirely).

In Category 2, the FCC has “streamlined” the eligible services to essentially focus only on the services and equipment necessary to bring broadband to classrooms.  While this has focused (rightly so) on wireless network infrastructure in classrooms, all of the supporting wired infrastructure that makes wireless possible, including not only access points but wiring, switches, and routers – are also eligible for discounts.  Other equipment which was traditionally eligible, such as phone systems and servers, has been eliminated, while new services (notably “managed internal broadband” services and caching) have been made eligible.

Aside from the streamlining of eligible services in Category 2, the other major change in C2 is that the Commission has put a funding cap on the amount of funding that each school or library can receive ($150/student over five years for most schools, with a floor of $9,200 per school), which means there may actually be some funding available for C2 unlike past years.  While the Commission has not guaranteed C2 funding, the Commission  expects that the “savings” from eliminating the eligibility of voice, web hosting, and other services from C1 may (in combination with other changes and funds which the Commission has on hand) make up to $1 billion available for C2 services each year.  Although this funding is not guaranteed, there is a good chance – at least in the next few years – that C2 funding may be available to schools and libraries.  This represents a rare opportunity for funding in the E-rate program.  If schools and libraries apply for and receive funding for C2-eligible projects, that funding may offset (or in some cases even exceed) some of the costs that are being shifted onto schools and libraries in Category 1 funding.

What these changes mean, in dollars and cents, for schools and libraries will vary based on what services E-rate supported for the applicant in the past.  While the FCC looks at these changes as “streamlining” of and “savings” to the E-rate program, applicants need to recognize that the net result may well end up being a net cost shift onto the budgets of school and library systems.

Where the E-rate program has paid a significant portion of the costs for certain services over the last 16 years, the expenses associated with these services are now being shifted back to schools’ and libraries’ budgets starting in July 2015.  Business officers, budget directors, and chief executives in these organizations must plan for the resulting budget shifts now.  Similarly, those responsible for managing the E-rate application process within these organizations need to stay abreast of the changing eligible services and application landscape.

Aleck Johnson has worked in the education and information technology field for more than six years. His experience includes coordinating a number of political efforts at the Federal Communications Commission and in Congress around the E-rate, instructional television fixed service, ultra wideband, cable open access, intellectual property, and low power FM radio.  Aleck has also helped build community networks in Asia and Africa, served as a network administrator, and provided technical user support services.

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