What the New E-rate Funding Can Do for Your District

• By Dian Schaffhauser
• 12/15/14

The $1.5 billion increase in E-rate's annual funding approved by the Federal Communications Commission last week is expected to allow 101,000 schools and 16,000 libraries to expand their high-speed broadband and WiFi access. That extra funding has been guaranteed for the next five years, and much of it is expected to allow Priority 2 funds to go further, according to Ronald Sheps, director of public sector programs at Westcon. Sheps spoke during a webinar hosted by Carousel Industries. Both companies provide networking and communications services and equipment in the education market. (The webinar, "How to Maximize Your E-rate Investment," is archived and available for on-demand viewing through Carousel's event website here.)

E-rate has traditionally provided for discounts of between 20 percent and 90 percent of eligible costs for telecommunications-related services. Schools qualify for the discounts based on the number of students they have who are eligible for free and reduced lunches. The program has two levels of eligible services. Priority 1, which is always funded first, covers telecom carrier and fiber services as well as Internet access. Priority 2 provides discounts on services related to internal connections and their basic maintenance. If money remains from the pool of funding of Priority 1 services, Priority 2 services are funded, beginning with the neediest applicants first.

Up until now, Priority 1 requests have consumed almost all of the E-rate funding; in 2014 Priority 1 requests were the only ones fulfilled in the program. Where money has been available for Priority 2 services, funding has frequently gone only to the most economically disadvantaged districts.

The newly approved money is expected to cover all eligible requests from Priority 1 and stretch well into Priority 2, Sheps noted. He added that the top discount category for Priority 2 services will now be 85 percent instead of 90 percent in order to spread the funding more broadly.

Most of the new funds will be spent on WiFi gear. As the FCC stated in its announcement of the E-rate changes, "The program improvements will target an additional $5 billion for WiFi over the next five years, which is sufficient to expand WiFi networks in all schools and libraries." The Commission predicted that the changes will "potentially" provide a 75 percent increase in WiFi funding for rural schools over the next five years, and a 60 percent increase for urban schools.

As Sheps explained, a "much narrower spectrum of products" will be eligible for E-rate. "Historically routers, access points, switches and internal cabling have been eligible, and they will continue to be. Components such as voice over IP cards, circuit cards… will no longer be supported in E-rate."

However, he added, "you're going to see a greater emphasis on a new category created for E-rate called managed internal broadband service." This category will include operation, management and monitoring of a LAN or wide area LAN, whether handled internally or through a managed service.

Every School Will Get $9,200

The E-rate program is also guaranteeing "every school building in the country" a minimum of $9,200, "regardless of the need," Sheps said. Here he was referring to an FCC order that allows schools seeking funding in 2015 or 2016 to request discounts on purchases of up to $150 (pre-discount) per student for Priority 2 services over a five-year period. To ensure the Priority 2 budgets are enough to meet the demands of schools with a very tiny number of students, the order has set a funding floor of $9,200.

This "rolling funding cycle" of five years replaces the existing "two-in-five-year rule," which stipulated that eligible E-rate applicants could only receive funding for internal connections in two out of every five years. (The idea was to help spread the funding among more schools by discouraging the neediest ones from continually upgrading their systems.)

Over a five-year period, for instance, a school or school district at the 80 percent discount level will be able to request up to $120 in E-rate support per student (an 80 percent discount on $150 in services). The school or district will pay 20 percent of the cost of the eligible services. If 1,000 students attend that school or district, the budget for the five-year period would be $120,000 ($120 times 1,000 students). If that same school or district skips a funding year and requests $20,000 in Priority 2 support for 2016, it could still request the additional $100,000 over the next four funding years (2017 through 2020).

Some Funding Will Expire, All Applications Will Speed Up

While adding to the overall disbursement fund, the revised program ends eligibility for a number of staples on the services list. These include Web hosting, voicemail, e-mail and texting. Legacy voice services such as local and long distance phone service, Centrex, voice over IP and wireless phone services will be phased out at the pace of 20 percent per year. For example, an applicant with the top discount of 90 percent will see that drop by 20 percentage points in 2015, 40 percentage points in 2016, and so on. By 2019, the discount will be gone.

Sheps noted that the FCC also anticipates streamlining and simplifying the E-rate application process. That includes an expedited approval process and more use of online forms and application processes. "There's never been an approval that lasts less than 200 days," he marveled. "Their commitment to get it done in 75 days is stunning."