Looking Inside the E-Rate Overhaul

Last year, the Federal Communications Commission overhauled E-Rate, a program intended to ensure that K–12 schools and libraries — particularly those in low-income or rural areas — have affordable access to telecommunications and Internet services.

The changes to E-Rate, formally called the schools and libraries universal service support mechanism, came after President Barack Obama called on the FCC to modernize the program to meet broadband and Wi-Fi connectivity goals outlined in his ConnectED Initiative. The FCC’s changes to E-Rate focus on three areas: ensuring that schools and districts have affordable broadband and Wi-Fi; maximizing E-Rate spending; and making the administration of the program and the application process faster, simpler and more efficient.

Ensuring Affordable Broadband and Wi-Fi

The fundamental structure of E-Rate remains the same: Discounts are based on economic need, and the program allows individual schools or districts to choose the providers or technologies that best fit their needs as long as they’re the most cost-effective options, says Jon Wilkins, the FCC’s managing director.

The biggest structural change is a $1 billion annual commitment to internal networks, which aims to ensure that schools receive the subsidies they need to provide students with high-speed Wi-Fi access in their classrooms. The FCC’s modernization efforts will ensure that E-Rate will fully fund schools’ Wi-Fi needs over the next five years, Wilkins says.

“We feel highly confident, between the new higher spending cap and phasing out of support of older services, that we will fully fund both categories,” he says.

The FCC has also changed the names of the funding categories from Priority One and Priority Two to Category One and Category Two. Here are more specific changes to the two categories:

Category One Changes: While the highest discount level for Category One services remains at 90 percent, the highest discount rate for voice services will drop to 70 percent for the 2015 funding year and decrease another 20 percentage points each year after.

Category One services eliminated include email, text messaging, voicemail and web hosting.

Category Two Changes: The highest discount level for Category Two services and equipment has been reduced from 90 percent to 85 percent. This will spread E-Rate funds more widely and provide an incentive for applicants to find the most cost-effective options, the FCC said.

The previous rule that schools can receive funding only for internal connections in two years out of any five-year period has been eliminated. The new rule allows schools to apply for Category Two funding for purchases of up to $150 (pre-discount) per student over a five-year period.

New Category Two services and equipment that are eligible include managed Wi-Fi services and caching technology, which stores frequently accessed links and other web content locally. The FCC has also eliminated E-Rate support for Voice over IP systems, virtual private networks and software, except for software used for internal broadband distribution.

Supporting Broadband

The FCC’s second Modernization Order in December provided more flexibility and options for schools to access affordable high-speed broadband, with the goal of spurring investment in high-speed broadband infrastructure.

Toward that goal, beginning in the 2015 funding year, the FCC is suspending the requirement that schools seek E-Rate funding for large upfront (nonrecurring) construction costs over a period of several years. Schools can now pursue large construction projects and get E-Rate funding upfront in one year.

Beginning in funding year 2016, schools and districts can also:

• Pay their portion of nonrecurring large construction costs over multiple years through an installment plan. Previous rules required schools to pay their portion within 90 days of service delivery.

• Use E-Rate funds to lease dark fiber, which can drive down broadband costs. Previously, schools could purchase only lit fiber services.

• Build their own high-speed broadband facilities if this is the most cost-effective solution.

• Receive additional E-Rate discounts if states help fund high-speed broadband construction. If a state agrees to provide financial support for last-mile broadband facilities, the E-Rate program will match the state’s contribution by providing up to 10 percent in additional Category One discounts.

Maximizing E-Rate Spending

The FCC has made several rule changes to drive down the cost of services and equipment and to ensure that schools are spending E-Rate funds as efficiently as possible. They include:

Price transparency: The FCC has directed the Schools and Libraries Division (SLD) of the Universal Service Administrative Company (USAC), which manages the E-Rate program, to post the prices of services and technology that each applicant pays.

Posting the prices will create transparency and allow schools and districts to see what others are paying, so they can negotiate better prices, says Keith Bockwoldt, director of technology services at Township High School District 214 in Arlington Heights, Ill.

“In Illinois, you can have one district paying $3 per megabyte and another paying $9 per megabyte from the same vendor,” he says. “We feel it should be equitable, so transparency can make a difference.”

Bulk purchases through a consortium: To encourage schools and districts to join a consortium, the FCC will prioritize E-Rate applications from state and regional consortia. Bulk purchasing through a consortium can drive down prices.

Making Application and Administration Faster, Simpler and More Efficient

USAC has made great strides in streamlining the application process and speeding the review of applications.

For example, the new online application features drop-down menus, which reduce errors, prepopulate applicant information where possible and provide embedded tips as users go through the application, says Mel Blackwell, vice president of USAC’s SLD.

USAC is also reviewing applications and making commitment decisions faster than ever. Last year, USAC completed the funding process by Oct. 1. The goal for the 2015 funding year is to complete the funding process by Sept. 1.

Changes to E-Rate that will speed and simplify the application process further include the following:

Streamlined applications for multiyear contracts: Applicants entering new multiyear contracts can use a streamlined application process in subsequent funding years if they submit a complete FCC Form 471 the first year.

Eliminating the technology plan requirement: Historically, E-Rate has required applicants to develop a tech plan that is approved by a state education agency or other USAC-certified body. The FCC eliminated the tech plan requirement for Category One services in 2010 and now has eliminated the requirement for Category Two services.

Eliminating paper applications: Applicants and service providers must file all documents electronically to USAC.

Adopting districtwide discount rates: To simplify the application process, each district is now required to calculate and use a single districtwide discount rate instead of calculating and using building-by-building discount rates.

Want to learn more? Check out CDW’s white paper, “Get Ready for E-Rate 2.0.”