The Impotance of Obeying E-Rate’s Rules


Since 1998, Americans have paid more than $8 billion in assessments on their telephone bills to help provide schools and libraries with discounted access to the Internet, as well as to support investments in networking infrastructure. Now more than ever, it’s important for school officials to pay close attention to the E-rate program’s rules and requirements in order to help ensure that this significant funding source for school technology is not disrupted.

So far, support remains strong for the more than $2.25 billion of discounts for which the E-rate program is authorized. Nevertheless, it’s important for school leaders and their vendors to be mindful that the media, taxpayer watchdog groups, and some on Capitol Hill and within the Federal Communications Commission have raised thoughtful concerns about the potential for waste, fraud and abuse within this important program.

The Dark Side of E-Rate

Sadly, it seems that whenever a substantial pot of government money becomes available, bad actors will find it and seek to exploit it for their own illegal purposes; the E-rate program is no exception. Records show that within its first few years, a small number of individuals and companies figured out ways to defraud the E-rate program by taking advantage of what was hoped to be a streamlined process of self-certification by applicants and vendors, and payment of invoices to participating companies.

At the same time, many school officials either did not understand the program’s many rules and requirements, or they decided program officials were not particularly serious about enforcing them. As a result, when auditors returned several years later to review whether E-rate funding had been used appropriately and according to program rules, too many school officials were unable to produce documents demonstrating that the rules had, in fact, been followed.

All of this has fueled concerns that the program is fraught with waste, fraud and abuse. The reality, however, is much more complicated. While there are a few instances of outright fraud, I believe the vast majority of program participants do want to follow the rules. Yet school and library applicants have been confused over those ever-evolving rules, particularly those involving gray areas of product and service eligibility.

Meanwhile, program administrators were not always able to move quickly to enforce the rules and address areas of concern. This is partially due to limits that had been placed on their authority, disagreements over whether certain federal laws could apply, and limits on the funding that was available to administer the program in a more timely fashion.

Goals and Requirements

As school officials now prepare to apply for the program’s eighth year of funding, they must recommit themselves to E-rate’s basic goals and requirements. Among the steps they should take:

  • School officials must take charge of defining their technology needs, align those needs with their academic goals, as well as be able to defend the technologies they have chosen and the purchases they want to make.

  • School officials must ensure that they follow a competitive bidding process when they procure E-rate-supported products and services.

  • School officials must understand and follow the rules of when purchases can be made and installations completed.

As of this writing, the FCC is implementing changes that it hopes will enable more schools to use the program. Among other things, these new rules will bar school officials from trying to transfer E-rate-supported equipment to wealthier schools too quickly after it is originally installed in a low-income school. Furthermore, starting next year, school sites will be able to qualify for discounts on internal connections in only two out of every five years. This is another step designed to spread the available money more widely.

For some schools - those with annual phone bills of a few thousand dollars and no plans to build a 21st century network - it may not be cost-effective to continue participating in the E-rate program. However, for the rest, it’s time to make a renewed commitment to follow the rules, use the discounts, keep good records, and spread the word about everything technology is helping schools accomplish.

Funds For Learning LLC, a consulting firm focused on the E-rate program, is the creator of E-rate Manager SL, a free Web-based tool designed to help applicants manage their approved E-rate funding commitments. For more information, visit

This article originally appeared in the 10/01/2004 issue of THE Journal.