Policy & Funding

E-rate FAQ: FCC Releases New Rules for Ed Tech Funding

The federal E-rate funding program is an essential resource for supporting connectivity in schools and libraries. In 2014, the FCC started a five-year Category 2 budget trial to fund critical network infrastructure. This test run would determine if the approach was an effective way to provide more equitable access to Category 2 services nationwide.

In July 2019 THE Journal covered the pending expiration of the Category 2 budget approach and the release of the Notice of Proposed Rulemaking from the FCC, which requested stakeholder feedback on their proposal to create a permanent Category 2 budget system.

In December 2019, the FCC released a long-awaited Report and Order making the Category 2 system permanent and streamlining the application process.

Here are the ed tech funding updates that E-rate applicants will need to know for funding year 2020 and beyond.

Q: Has anything changed for FY2020?

A: The FCC determined that FY2020 will act as a gap year between the old Category 2 regulations, and new rules outlined in the Report and Order.

Here are some key updates to keep in mind…

  • Category 2 budgets will be calculated using the same per-site methodology used in FY2015 to FY2019, but FY2020 budgets will receive a one-time 20 percent increase — a unique opportunity for E-rate applicants.

  • FY2020 Category 2 Budget Multipliers:

      • Schools: $195.63 per student

      • Libraries with IMLS Locale Codes 11, 12, 21: $6.52 per square foot

      • Libraries with all other IMLS Locale Codes: $3.00 per square foot

      • Entities at the Funding Floor: $11,998.43 per site

  • According to the FCC, the FY2020 E-rate Eligible Services List included “limited changes” for FY2020. The Commission declined to include new services or functionality as eligible for either Category 1 or Category 2 services.

Q: What’s in store for ed tech funding in FY2021?

A: Budget cycles, calculations and floors are all changing come FY2021. It’s critical that E-rate applicants read and understand the new Category 2 rules to make the most of their funds.

Q: How will E-rate applicant budgets be impacted?

A: Beginning in FY2021, all applicant budgets will be reset to the full amount available under the new Category 2 rules. As part of this modification, the FCC will adopt district-wide and library system-wide budget calculations.

Q: What are the new budget cycles?

A: The FCC’s revised ed-tech funding rules adopt fixed five-year budget cycles. The first cycle will run from FY2021 through FY2025. Applicants can submit E-rate applications in any or all Funding Years during this five-year cycle, with a new budget cycle beginning in subsequent five-year periods (e.g. FY2026). There will be no rollover of funds from cycle-to-cycle.

Q: How will budgets be calculated?

A: A popular request from E-rate stakeholders is being fulfilled: starting in FY2021 the program will adopt district-wide and library system-wide Category 2 budgets. This means school districts and library systems will have a single budget cap to administer.

  • The per-site funding “floor” for smaller sites will increase from $9,200 to $25,000.

  • Budgets will be calculated at the start of each five-year cycle. The FY2021 budget multiplier factors are $167 per student for schools, and $4.50 per square foot for libraries.

Q: What about the budget ‘floor’ for smaller sites?

A: To ensure sufficient funding to deploy internal connections, the new FCC rules include an increased funding floor for smaller sites. The updated floor will switch to a pre-discount level of $25,000 over the five-year funding cycle beginning in FY2021.

Q: What are some other Category 2 changes coming for FY2021?

A: FCC rules currently include a prohibition on equipment transfers that was meant to prevent applicants from circumventing the then-existent per-site Category 2 budget rules. Now, equipment transfer rules will be relaxed for equipment purchased with E-rate discounts in FY2021 and forward, affording applicants more flexibility to deploy equipment where it is most needed.

In a day and age where internet access is a requirement rather than a luxury, it’s critical that school districts and library systems have adequate resources to remain connected. The recent updates to E-rate’s Category 2 rules mark an exciting time for applicants.

For regular coverage of E-rate updates, register for Funds For Learning’s webinar series. If you’re interested in information about broadband resources, stay tuned for the release of Connected Nation and Funds For Learning’s new tool, Connect K-12.

About the Author

Brian Stephens is director of stakeholder engagement at Funds For Learning, a consulting firm that helps schools and libraries navigate the complex E-rate application process.