IT Infrastructure & Management

E-Rate Needs Overhaul for Digital Era, Experts Argue

By Alyson Klein — May 14, 2013 8 min read
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As school districts strive to put more technology into schools to support 1-to-1 computing initiatives and prepare for the common-core online assessments, the federal E-rate program is in danger of becoming as outdated and insufficient as a sputtering dial-up connection in a Wi-Fi world.

While the program can boast great success since its inception—just 14 percent of schools were connected to the Internet when the E-rate was launched in 1996, compared with near-universal access today—it is now at risk of buckling under the weight of districts’ technological demands in the age of laptops, tablets, smartphones, and 24/7 online activity.

The strains are likely to get even more acute as most states prepare to give assessments aligned with the Common Core State Standards. Those tests, slated to debut in 2014-15, will require hefty connectivity capabilities. Recent technical difficulties with online testing in some states highlight the need for better, more reliable technologies in schools. (See “Online Testing Suffers Setbacks in Multiple States,” May 8, 2013.)

Demand for E-rate dollars, which help schools and libraries get connected to the Internet, has outpaced the aid available for years. This year, districts asked for nearly $5 billion worth of projects, but the E-rate program itself is capped at $2.33 billion. The cap is now adjusted for inflation, but it was largely set in the late 1990s, well before the proliferation of mobile devices, wireless cards, and online testing.

The demand for E-rate dollars for telecommunications and Internet access has increased 252 percent since 1998, while the fund has grown only 8 percent over that same time, said John D. Harrington, the CEO of Funds for Learning, an Edmond, Okla., organization that helps schools apply for the aid.

“The E-rate isn’t broken,” he said. “It’s just broke. The world has changed, and unfortunately, the E-rate program hasn’t changed much. What’s happening now is creating a lot of strain on the system.”

In the complex landscape of Inside-the-Beltway budgeting, the E-rate does have an advantage: It doesn’t need to go through the congressional appropriations process. Instead, it is financed through fees on certain telecommunications services. The program is governed largely through the Federal Communications Commission.

As advocates begin a behind-the-scenes push for changes to the E-rate, spurred in part by the common-core tests, the FCC—and, potentially, Congress—has a set of choices that each come with their own set of political pitfalls.

Adding to the complications: The program doesn’t always operate as efficiently as it could. Between 1998 and 2006, more than a quarter of the money allocated to schools—$5 billion—was not disbursed when it was scheduled to be, according to a 2009 study by the Government Accountability Office, Congress’ investigative arm. The report also chided the program for lacking any sort of performance goals, which could help set priorities in the discounts offered, and for being so complicated that some districts are reluctant to apply.

Scaling Back Services

The option for revamping the program that district and state officials mention most often is to scale back the services that get funded first to focus primarily on bolstering Internet access for students. The program guarantees discounts on those so-called Priority 1 services, such as Internet access, and then allocates the remaining aid for Priority 2 services to the neediest districts.

Building A New and Improved E-Rate

As advocates begin a behind-the-scenes push for changes to the E-rate, spurred in part by the upcoming common-core online tests, the Federal Communications Commission—and, potentially, Congress—has a set of choices for building a new and improved “E-rate 2.0.” Among the ideas proposed:

INCREASE the size of the E-rate fund, which could mean siphoning off fees from another program, changing the fee structure so that telecommunications customers pay higher fees, or requiring more companies to pay into the fund.

LIMIT the number of services targeted first for financing under the E-rate’s complicated discount system. Right now, districts that want to offer such telecommunications services as local and long-distance telephone and cellphone plans, digital-transmission services, Internet access, and Web-hosting get priority.

REQUIRE the poorest districts—which now have 90 percent of their services covered—to kick in a higher share of the cost to help ensure they are invested in the effective use of the funding.

PROVIDE price-comparison information about the cost of different services to help inform purchasing decisions.

INVEST one-time federal dollars to help school districts put in place the infrastructure needed for fast Internet connections. That could cost more than $7 billion, according to EducationSuperHighway, a San Francisco-based nonprofit that works to help districts build their broadband infrastructure, but the spending could take considerable pressure off the E-rate program in future years.

REDIRECT recent savings from another Universal Service Fund program, Lifeline, to the E-rate.

SET clear “capacity goals” for schools seeking aid through the E-rate, encourage more public-private partnerships, and create a simpler process for E-rate applications.

GIVE schools broader leeway over how to use their E-rate discounts, but cap the amount of money each district receives. That would encourage schools to choose the services that are most important to them, proponents of the idea say. Caps would be based on student population and economic needs.

BUILD a “digital depository” staffed by information technology and business experts to help schools make better use of scarce E-rate dollars. Districts would have to form multidistrict consortia to access the depository—a way to ensure critical mass and boost purchasing power. The depository would help districts overhaul technology-procurement practices and share ideas about how to improve the use of technology in education.

Sources: Education Week; Funds for Learning; NewSchools Venture Fund; Federal Communications Commission

In recent years, only the poorest schools received Priority 2 funds, which pay for internal-connection equipment such as wiring and cabling and basic maintenance of internal connections.

But that issue could be at least partially resolved if the FCC took some services such as Web-hosting and even telephone service out of the Priority 1 mix.

Over the life of the program, “little by little, service providers have slipped things under the tent,” said Valerie Oliver, Alaska’s state E-rate coordinator.

“You have to draw the line at what E-rate pays for. ... All of the add-ons are very nice,” she said, “but that drains and takes away moneyfrom the original intent of the program,” which she sees as connectivity.

In particular, she said, “Web-hosting has galloped out of control.”

But Ms. Oliver is worried about the prospect of dropping telephone service from Priority 1 all at once, because of the impact on remote districts in her state.

“I do feel like it would hurt rural locations more,” she said. “The Internet is not quite as reliable in rural Alaska locations,” and people in those areas need telephones to stay in touch, she said.

What’s more, some districts are pushing to add to the menu of services under Priority 1.

For instance, some districts that offer 1-to-1 laptop programs would like their students to be able to use the devices at home as well as at school. But that step could add substantially to the E-rate’s already-strapped finances.

“That’s getting a lot of political attention, but it’s unbelievably expensive,” said Gary Rawson, Mississippi’s E-rate coordinator and the chairman of the State E-rate Coordinators Alliance. “Should it be the responsibility of E-rate and E-rate alone to encourage broadband adoption across the nation?”

Poor Districts Pay More?

Mr. Rawson does favor another potential change to the program: Asking the highest-poverty districts to kick in more of their own money. Right now, some districts put in only 10 percent of their own funds and are able to get all Priority 1 and Priority 2 services covered.

“There’s no financial incentive in their decisions,” Mr. Rawson said. “If I’m only going to pay 10 cents on the dollar, I don’t care how much it costs. I don’t care if I need it; I’m going to get it because I can.”

For instance, he said, some districts that qualify for high discounts go a bit overboard in offering cellphone services to their employees, since that’s covered under Priority 1, and the districts themselves only have to kick in a small percentage of the cost.

But the idea of upping poor districts’ contributions doesn’t sit well with Themistocles Sparangis, the chief technology director for the 650,000-student Los Angeles Unified School District, which qualifies for some of the heftier discounts.

“All [we’d be] doing is robbing Peter to pay Paul,” he said. Even with its large discounts, Mr. Sparangis’ district still has unmet needs.

Some districts say that even those solutions—better targeting funds, asking some districts to pay more—are no substitute for substantially boosting the cap on the E-rate fund.

“It’s just math. The need has eclipsed the fund,” said Sheryl Abshire, the chief technology officer for the 34,000-student Calcasieu Parish public schools in Louisiana. She is also the past chairwoman of the board of the Consortium for School Networking, or cosn, which represents chief technology officers from nearly 800 districts.

“If we rework some of the processes and don’t raise the cap,” Ms. Abshire said, “I fear what we’re doing is rearranging deck chairs on the Titanic. … It’s not about greed or want; it’s about mission-critical tools.”

Bolstering the size of the program would mean either diverting money from other parts of the Universal Service Fund—which also helps bring telecommunications services to remote areas and rural health centers, and telephones to low-income people—or revisiting the program’s complicated fee structure, in whichpowerful telecommunications companies have an interest.

Some district officials would like to see the FCC address contributions, even as they realize it would be an uphill political battle.

“We could raise the cap, we could raise the fee, we could widen the net of what we collect fees on,” said Mr. Sparangis. “It’s just pennies out of people’s pockets.”

But he added that telecommunications companies—which hold a lot of sway in Washington—would see any increase in fees as a tax. “That’s the push and pull on this,” he said.

Representatives from the telecommunications industry declined to comment for this story.

And while the FCC revisits the E-rate program periodically—there were key changes in 2010, including indexing the cap to inflation—it would be highly unusual for the agency to consider revamping the fee structure alongside tweaks to the E-rate itself. The FCC has broad, but not unlimited, authority to make changes to the E-rate and the Universal Service Fund. The organization declined to comment on its ability to act on suggestions made by interest groups, because they remain hypothetical at this point, a senior FCC official said.

Policymakers are becoming increasingly aware of the E-rate’s capacity problems, meanwhile, even though neither Congress nor the Obama administration has yet sketched out a road map for what a restructured program might look like.

Last month, however, Jessica Rosenworcel, an FCC commissioner, floated a list of “E-rate 2.0" proposals for modernizing the program, which include setting specific goals for the program and increasing the size of the fund by redirecting the savings from another program financed by the Universal Service Fund.

That would likely result in hundreds of millions—not billions—of extra E-rate dollars—a step in the right direction, but not enough to keep up with rising demand, said Jon Bernstein, the president of the Washington-based Bernstein Strategy Group, a government-relations firm that represents nonprofit and corporate clients in the education technology sector.

The broad principles Ms. Rosenworcel sketched out may have to hold off for a while, since the FCC recently lost its chairman. Advocates consider it unlikely that there will be substantial changes in the E-rate until a new chairman is in place.President Barack Obama has nominated Thomas Wheeler, a former chief executive of the National Television Cable Association to fill the slot.

Coverage of the education industry and K-12 innovation is supported in part by a grant from the Bill & Melinda Gates Foundation. Education Week retains sole editorial control over the content of this coverage.
A version of this article appeared in the May 15, 2013 edition of Education Week as E-Rate Program Seen as Too Lean For a Digital Era


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