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Answers to Common Questions about the E-Rate Modernization Proposal to Get Wi-Fi in ALL Schools and Libraries

by: Gigi B. Sohn, Special Counsel for External Affairs, Office of the Chairman and Patrick Halley, Associate Chief, Wireline Competition Bureau

June 30, 2014

We have spent the past few days – at the American Library Association annual conference in Las Vegas and in Atlanta at the International Society for Technology in Education 2014 conference and the State Educational Technology Directors Association Emerging Technologies Forum – talking with stakeholders, from teachers and librarians to individual school superintendents, CTOs and state education technology directors, about Chairman Wheeler’s E-rate Modernization proposal.  In talking to these stakeholders, we found that there are some common questions people have about the proposal.  

1. Closing the Wi-Fi Gap by connecting all schools and libraries is a laudable goal, but how do the numbers add up over a five-year period?
The Chairman’s proposal to pay for the annual $1 billion Wi-Fi program is actually pretty simple.  We are on track to free $2 billion in reserves that we are prepared to spend over the next two funding years.  Funds for the following three years would come from two significant changes.  First, we would phase down support for non-broadband services, like pagers, email and, over a multi-year period, voice service. Those funds – nearly $1.2 billion in the E-rate program today – would be repurposed to support Wi-Fi.   Second, we would achieve significant cost savings in the program within the new “category two” Wi-Fi bucket (see recent announcement with GSA for example), and for the priority one (proposed to be called “category one”) services we continue to fund through improved pricing transparency and facilitating increased use of consortia-enabled bulk purchasing.  And, as the Chairman has said, we will continue to look at long-term program costs to ensure that funds will in fact be sufficient to meet program goals, both for category one (TO the school/library) and category two (WITHIN the school/library).  

2. Is anything being done to address non-Wi-Fi connectivity needs in the Chairman’s proposal?

Yes. In addition to closing the Wi-Fi gap, the proposal would make E-rate rules fairer so funding for internal connections is available to the vast majority of schools and libraries, rather than just a few. In addition, the proposal would streamline the program and institute reforms to ensure current funds are maximized.

The data shows that Wi-Fi is the biggest near-term need. Three out of five schools lack access to a sufficient in-classroom connection, largely because current E-rate rules that give the lion’s share of funding to a very small fraction of schools and libraries with connectivity needs.  The good news is that, once funding becomes available, Wi-Fi networks can be deployed very quickly.  That is why acting now in time for the 2015 funding year is such a huge opportunity.

However, we agree that broadband infrastructure TO the building remains a challenge for many schools, and far too many libraries.  The Chairman believes this can be addressed by taking steps to improve the fairness of this part of the program as well.  For example, where price is a barrier to that infrastructure, this proposal would require far greater transparency in what is being purchased with E-rate dollars. This would allow applicants to see what others are paying for similar services. This is particularly helpful in rural areas where there is often less competition at the local level. Having the knowledge that providers in other similarly rural parts of the country are offering the same service at far lower rates should help rural schools and libraries negotiate lower prices.   Another example would be to streamline the ability of schools and libraries to purchase 100+ Mbps Internet access by removing competitive bidding requirements when they purchase commercially available service below a certain price.  This improvement would make the rules fairer by allowing low dollar purchasers, such as smaller schools and libraries, many of which are not fortunate enough to participate in larger district or consortium purchasing groups, to get the benefit of commercial pricing without the administrative overhead of a full competitive bidding process.

We know the Wi-Fi gap is not the only challenge, and the overall proposal addresses many elements of modernization.  But Wi-Fi is the one area of need that our current rules do not adequately address, to the detriment of millions of students, and it is the one that most quickly will improve if we make funding more broadly available.

3. What will this plan mean for rural schools and libraries?  The Chairman’s modernization proposal, if adopted, would significantly expand access to Wi-Fi funding in rural areas. The proposal would close the Wi-Fi gap that currently exists in the program – a change that would enable at least an additional 6 million children, disproportionately in rural areas, to access Wi-Fi and the 21st Century educational tools it enables during the 2015 funding year alone. Under the current system, rural schools on average receive 25% less Wi-Fi funding for every student, and 50% less funding for every school, compared to their non-rural peers, because the current rules often put them at the back of the line.  With improved rules, over the next 5 years Wi-Fi funding for rural schools would be increased by 75 percent. As a near-term benefit, the proposal would also make it substantially easier for low dollar purchasers, including smaller, rural schools and libraries to purchase 100 Mbps or higher business/enterprise service commonly available below a certain price. How? By dramatically streamlining the application requirements for these offerings, requirements that have deterred many schools and libraries from utilizing E-rate. Finally, requiring greater pricing transparency in the program would help lower rates for services in rural areas as we continue to consider additional steps to address areas lacking sufficient infrastructure.   

4. What will the effect of this plan be on urban districts?

Urban schools will benefit significantly under the Chairman’s proposal. Over the next 5 years Wi-Fi funding for urban schools would be increased by 60 percent.

5.  Does the proposal make E-Rate funding more equitable?

Yes. The Chairman’s proposal maintains the basic structure of the E-rate program—discounts on the services each applicant actually needs, based on their circumstances. The difference is it would require a common sense budget for Wi-Fi spending, which would keep a few big spenders at the front of the line from using all the funding.  In reality, when it comes to providing high-capacity Wi-Fi in all libraries and classrooms, the current system could do a better job for the majority of America’ schools and libraries. Last year, zero schools and libraries received support for internal connections.  Of the support that has been provided in recent years, it has only been available to the same schools who receive the highest E-rate discounts (the “90% schools”). This structure deters all but a few schools and libraries from applying for funds and provides incentives for those most likely to get funding to request above-average levels of support. A “universal service” program is not working when only a few benefit.

In 2012, the last year internal connections funding was available, less than 5% of schools and just 1% of libraries nationwide received any support. Among the applications that received funding, most received amounts consistent with the proposed five-year Wi-Fi budget.  But a handful  – representing one-half of one percent of all schools in the country – spent far more than their peers.  On average, 500 schools received more than 8 times as much per student as the average among all other funded schools.  The Chairman’s proposal, on the other hand, would provide an influx of support for all schools and libraries at levels consistent with what the vast majority have needed (urban and rural) –  whether funded by E-rate or not -- to deploy and maintain Wi-Fi systems.  And it would do so while maintaining the poverty-based nature of the program and continuing to provide a bump for certain rural schools so that those who need it most receive the most.

***

Getting outside of Washington to talk to the people who rely on E-rate directly has been refreshing. It is understandable that questions and concerns are being raised when the FCC is on the cusp of taking a step to make real changes to the program for first time in almost two decades. What our discussions have revealed is that everyone shares the same goals, and while there are naturally some differences of opinion around the details, there is a strong desire to take an important step forward to modernize the program.  We look forward to continued discussions to produce the best possible order next month as a first critical step in the process to modernize the E-rate program.

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