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Published Online: March 22, 2007
Published in Print: March 29, 2007, as E-Rate’s Imprint Seen in Schools

E-Rate’s Imprint Seen in Schools

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After helping wire almost all American schools to the Internet, the 10-year-old E-rate program has even greater challenges ahead, its supporters say, as well as design problems to solve.

Since its founding, the federal program has committed $19 billion to help thousands of U.S. schools—large and small, urban and rural, public and private—afford the full range of telephone and Internet services.

“There’s no question, the E-rate is the most important funding mechanism for education technology for K-12,” says Keith R. Krueger, the executive director of the Washington-based Consortium of School Networking, which has school technology officials among its members.

In schools around the country, teachers and students have used the new telecommunications capacity to tap resources for learning, to publish their own work on the Web, and to share information worldwide. Rural schools have turned to videoconferencing and the Web to provide courses in subjects for which teachers are not locally available. Some schools are starting to offer services to some students with disabilities at home, too.

And, largely unforeseen a decade ago, that capacity has enabled the growth of new industries of providers of online content and services, including the burgeoning virtual school sector.

“If schools didn’t have Internet access, as well as infrastructure, you would have closed the door on virtual schools,” says Elizabeth Pape, the president and chief executive officer of the Maynard, Mass.-based Virtual High School, a cooperative of more than 400 schools, in 28 states and 23 countries, that share online courses.

Successes have come despite problems that have dogged the E-rate program from the start. Those include an application process some call unwieldy; political controversy over the funding model, which is outside the normal federal appropriations process; and incidents of waste and fraud that have led to congressional investigations and cast a pall over the program.

A Grand Bargain

Congress authorized the “education rate” in the Telecommunications Act of 1996, as the first major expansion of the federal program of universal phone service, which has subsidized service in rural and high-cost areas since 1934.

E-Rate Dollars Over Time

After hitting a high of $2.7 billion in 2003, funding for the federal E-rate program, which provides telecommunications discounts to eligible schools and libraries, declined to $2 billion in 2005, the lowest level of funding since 1998.

*Click image to see the full chart.

Note: Years denote funding years running from July 1 of the year listed to June 30 of the following year. For example, 2005 refers to July 1, 2005, to June 30, 2006.

Congressional backers viewed the program as a means of allowing education to share in the benefits of deregulating the industry, which was being freed to seek profits in new territories and services.

In a landmark order on May 8, 1997, the Federal Communications Commission specified that nearly all K-12 schools would be eligible for discounts of 20 percent to 90 percent on the cost of commercially available telecommunications services, Internet access, and internal connections.

Under the program, schools’ discounts are determined by their students’ poverty rates and whether they are in high-cost locations for telecommunications.

Funding for the school discounts is siphoned from the industry revenues for long-distance phone service. The money is paid to companies that provide the services, which include telephone and Internet connections, installation and maintenance of networks, and wiring of classrooms. The prices for those services are to be determined by competitive bids.

Schools, districts, and states submit more than 30,000 applications annually for discounts.

Tackling Abuse

Over time, the program has added to the list of eligible equipment and services—most recently, to include Internet-based phone service and handheld telecommunications devices—to keep pace with evolving technology.

Other program changes have targeted misconduct, including cases in which companies, with the connivance of school officials, have sold unneeded equipment or skirted competitive-bidding rules. Further changes are under consideration.

As a branch of the nation’s overall universal service, meanwhile, the E-rate is party to another problem: Revenues from long-distance calling have plunged, as ratepayers have moved to mobile phones and calling plans that charge based on minutes, not location. And the United States now has more broadband lines—which aren’t assessed universal-service fees—than traditional voice lines.

Proposals before the FCC and in Congress include charging a flat fee per telephone number, or a charge based on the number of communication links—of all types—that each customer has.

Says James C. Kohlenberger, a telecommunications consultant who helped craft the legislation that led to the E-rate as a senior White House policy adviser in the Clinton administration: “It’s universally agreed that universal service needs to be modernized.”

Meanwhile, advances in online applications that gobble large amounts of bandwidth are repeatedly pushing schools’ telecommunications capacities to the limit. Because of that, advocates argue, the need for the E-rate has not diminished.

“With the E-rate, there’s a sense that once kids are connected, the job is done, but it’s just the beginning,” Kohlenberger says. “The Internet only becomes more demanding.”

Vol. 26, Issue 30, Page 12

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