E-rate FAQs (Frequently Asked Questions)

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Frequently Asked Questions Follow the Money A Program Is Born: Timeline The E-rate's Future A Bureaucratic Hassle, But Worth It Leveraging the E-rate's Power Rating the E-rate What is the E-rate?

The E-rate (short for education rate) is a program administered by the Federal Communications Commission that pays for telecommunications services and related equipment for the nation's K-12 schools and public libraries. The FCC began awarding E-rate aid in 1998.

How much money can be given out each year?

The FCC has set an annual cap for the fund of $2.25 billion. The Universal Service Administrative Co., a nonprofit organization that manages the fund for the FCC, is currently informing schools of their awards for Year 3 of the program, which ends June 30, 2001.

How does the program work?

Schools apply each year for funding, either individually or as part of consortia, such as a district, a group of districts, or all the schools in a state. But they never receive E- rate money directly, if at all. Instead, they are awarded discounts on eligible services or equipment. Vendors selected by the schools to provide the services and equipment bill usac for the discounted portion of the cost, and, in about half the cases, bill the schools for the undiscounted portion. In the remaining cases, schools pay up front for the discounted portion and are later reimbursed by the vendor when the E-rate funds come through.

How is a school's discount level determined?

Discounts range from 20 percent to 90 percent, depending on the poverty level of the school's students (as determined by their eligibility for free or reduced-price lunches) and whether the school is categorized as "urban" or "rural." Discounts for schools in rural areas are slightly higher for some poverty levels than discounts for "urban" schools, a category that also includes suburban schools.

How can the money be used?

For three main purposes: telecommunications services provided by telecommunications companies, which include long-distance and local telephone charges; Internet services, including access charges, conveyed by Internet service providers; and internal connections, which pay for the cables, hubs, and routers, among other equipment, that make up a school's computer network. All applicants are eligible to receive aid for the first two categories. Money is given out for internal connections only when requests for the first two purposes are satisfied. The neediest applicants get top priority for this third pool of money.

What about computers or teacher training?

The program doesn't pay for these expenses.

How did the program come about?

The Communications Act of 1934 established a federal policy known as "universal service." For decades, its purpose was to ensure that everyone in the United States had access to telephone service at reasonable rates. The Telecommunications Act of 1996a thorough revision of the federal law governing communications servicescreated the E-rate program by expanding universal service to include telecommunications services for schools and libraries.

Where does the E-rate money come from?

Universal- service fees collected from telecommunications companies, primarily long- distance telephone companies, go into a fund administered by the FCC. The phone companies typically pass on these charges to their customers.

—Mary Ann Zehr

Vol. 20, Issue 3, Page 4

Published in Print: September 20, 2000, as E-rate FAQs (Frequently Asked Questions)
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