E-rate apocalypse?! Not so fast.

Erik-Heinrich-1 Erik Heinrich February 26, 2019

If you work for, or with schools and libraries you have most certainly heard or asked the following questions over the past year:

“What will happen to E-rate next year?” or, “Will E-rate go back to the two-in-five-year rule?”

…and then of course there’s the gravest of questions, “Is E-rate going away?”


Perhaps the easiest of these questions to answer is whether E-rate is “going away.”  Simply put, no. E-rate is a U.S. Federal subsidy program available to schools and libraries in support of deploying and maintaining affordable Broadband Internet access for instructional purposes.  Funding for this program continues to be collected today, as it has since its inception in 1996 via the Universal Service Fee on every U.S. phone bill. Despite changes to the oversight of this fund from the Universal Service Administrative Company (USAC) to the U.S. Treasury, assurances remain that this funding will not be reappropriated. Short of an act of Congress, the money is there.

In the absence of clear and concise guidance from the FCC & USAC (nothing about E-rate is clear and concise) on potential changes to the program, we can certainly read the proverbial tea leaves and arrive at some relatively confident assumptions until more information is released. I base my conclusions on what we know about the E-rate program historically, a recent report published by the FCC and recent conversations with FCC & USAC officials.

Let’s try and understand a little more about the current E-rate program and what is at stake. In December of 2014, the same month I started at Ruckus, the FCC issued its “Second E-rate Modernization Order.” This order detailed the commission’s intent to improve performance and achieve the program’s goals of increasing broadband access (Internet) in schools and libraries, particularly where such access is limited. The initiative is subsidized based on level of need (Free & Reduced Lunch) and student population (~$150 per student).  This is a relatively crude summary, although it should provide a 100,000 foot “blog” view. 

One of the biggest changes was the adoption of a five-year budget that replaced the Priority 2 “two-in-five” rule, which had previously limited applicants to file for E-rate twice within any five-year period. The new Category 2 five-year budget provides flexibility for applicants to apply based on their technology requirement cycle, internal budget availability and capacity to manage and support technology deployments. With the pending expiration of the current modernization order, many wondered whether a return to the two-in-five rule was looming. I’m happy to share that the two-in-five rule is NOT going to return based on a reading of DA-19-71A1, the Category 2 Budget Report published last week (February 12, 2019). In addition, I found the following noteworthy conclusions and recommendations within the document (heavily summarized/bold added for your benefit):

  • Overall, we observe that schools and libraries participate at a high rate, and funding is available to entities in urban and rural areas, and across all discount bands.  Applicants have flexibility to determine how best to use funding, demonstrated by the varied usage rates and number of years applicants receive funding. Here’s a quick way to check the reported budget remaining for your District or School.
  • We conclude that the category two budget approach is a clear improvement over the two-in-five rules approach. Under the category two budget approach, greater funding is available for internal connections, distributed to more applicants, in a more equitable and predictable manner, giving applicants more flexibility to determine how best to upgrade their systems. Specifically, under the category two budget approach, applicants have had access to category two funding every year, and no requests have been denied due to insufficient funding
  • The category two budget approach may not be sufficient, however, for schools and libraries at the funding floor, as well as libraries outside of highly-concentrated urban areas. 
  • Recommendations.  Given the improvements that the category two budget approach has shown over the two-in-five rules, the Bureau does not recommend a return to the two-in-five rules approach. The Commission established five-year category two budgets to make funding for internal connections more equitable, predictable, and more broadly available. It did so in recognition of the importance of internal connections, particularly robust Wi-Fi networks, the role they play in enhancing educational opportunities for students and library patrons, and the potential for these networks to close the digital divide. Learn how East Side Union High School District connected students out of school to close the Homework Gap. 
  • Further, we recommend that the Commission consider some targeted changes to the budgets moving forward such as an increase in the funding floor, to the extent that it finds that insufficient funding is deterring entities at the funding floor and rural libraries from participating. 

As a new member of the Schools, Health & Libraries Broadband Coalition (SHLB) Board, I recently had the privilege of joining a call with Radha Sekar, CEO of the Universal Service Administrative Company (USAC). I will also be participating in an upcoming call with Former FCC Chairman Tom Wheeler to hear the concerns of applicants, E-rate consultants and service providers about the continued evolution of this critical program. It seems clear that there is some disparity between the various opinions about the current level of program efficiency and priorities. Nevertheless, all parties agree that there is room for significant improvement in terms of process. I look forward to doing my part with SHLB to submit public comments to the resulting NPRM (Notice of Proposed Rulemaking) by the FCC. I would love to hear any thoughts on what concerns and questions you might have about E-rate for the coming year.

About the Author


Erik Heinrich

Senior Manager SLED Business Development • Some little tidbits about me are that I love sharks with the agreement that I stay on land and they stay in the water. I love to sing karaoke, but only privately, without a mic, in my head. Ok, I hate karaoke. • My current #1 most played song from my playlist is "Right in Two" (Tool Cover) by Beard of Harmony ft. Yann Phaypet. • My interest in scientific discovery was sparked by the 1978 BBC program called “Connections” with science historian James Burke. • And my favorite quote comes from Snow Crash by Neil Stephenson. “...all information looks like noise until you break the code.”