Dennis Pierce’s May 2009 article for eSchoolNews, “Unused eRate funding totals billions,” was published in the print edition of eSchoolNews in June. The article summarizes an eRate research report covering eRate from 1998 to 2006, which found for various reasons:

…more than 25 percent of the available eRate funding that was committed to applicants during the program’s first nine years has not been disbursed.

Article commenter “dan597″ observed accurately that this headline and statement may be misleading, writing:

The headline on this article makes it sound as if 25% of E-Rate funding is just sitting around unused. That is not the case. Unused funding is carried over to future years. Those carryover funds have provided increased funding in recent years, allowing the funding of applicants who would otherwise have been precluded.

The final sentence of the article, however, addresses this concern, with Dennis noting and quoting the original GAO report:

Though unused funds are reallocated for use in future years, they are “still problematic,” notes the GAO’s report, “because they preclude other applicants from being funded” during the program year in question.

This GAO report was actually published in March 2009 under the title, “Long-Term Strategic Vision Would Help Ensure Targeting of E-rate Funds to Highest-Priority Uses.” There were two key recommendations made by GAO researchers in this report, which were not included in Dennis Pierce’s article:

To ensure targeted and efficient use of program funds, FCC should (1) report to Congress on its strategic vision for the E-rate program, including long-term goals, and (2) report annually in its performance plan on undisbursed funding associated with expired funding commitments. FCC took no position on GAO’s recommendations, and USAC noted it stood ready to work with FCC to develop and report performance goals and measures.

I heartily agree that the eRate program needs a revised “strategic vision.” Working as I did for AT&T from 2006 through 2008 as the Director of Education Advocacy for the state of Oklahoma, I gained a lot of insights into the eRate program from both the perspective of service providers as well as the schools and school constituents eRate was designed to serve. Since it started in 1996, eRate has been focused on providing Internet connectivity for United States schools and libraries. If you’re not familiar with eRate, check out both the English WikiPedia article for eRate as well as the FCC’s Schools and Libraries Division (SLD) website maintained by USAC. USAC administers eRate for the SLD, which in turn reports to the FCC.

Just as the United States needed governmental regulations and subsidies to complete electrification of our nation, particularly in rural areas in the 1940s and 1950s, we need governmental intervention to provide robust Internet connectivity for ALL the students, teachers, and citizens in our communities today. It is a ridiculous idea to propose we should simply “leave it up to the market” for high speed connectivity to be provided for all the citizens of our nation. Do you live in a rural community now? If not, have you been in a rural community lately and tried to get online with a cell phone? How about trying to get high speed Internet service at a residence or place of business in a rural location? In many communities, you’re lucky if you can get DSL. Satellite Internet options are available in many areas, but are VERY expensive and comparably much slower to cable modem speeds and newer VDCL options like AT&T U-Verse. Why have our rural communities not been served with a rich array of high speed Internet connectivity options by corporations providing Internet service? One reason: ROI. If you live in a sparsely populated area, the return on investment / rate of return calculations for corporations and even small businesses are stark when it comes to high speed Internet connectivity. Businesses can’t make money serving sparsely populated areas the same way they can when population concentrations are higher. The result is our digital connectivity divide, which is VERY real and should be of BIG concern to all of us, wherever we live.

Golden Gate Bridge

The E-Rate program is many things to many people. From one perspective, it is essentially a wealth redistribution program which guarantees Internet Service Providers (ISPs like AT&T) will have a guaranteed revenue stream of millions of dollars to provide Internet connectivity to schools and libraries. All telecommunications customers in the United States pay a “universal service” tax on every bill which goes into a big pot of money. That money is disbursed through several programs, one of which is E-Rate. If you’re an ISP, E-Rate is a great program even though it has lots of bureaucratic hurdles to navigate. Checks and balances are essential for any governmental program: Without them, and even WITH them, unfortunately some commercial providers as well as recipient school districts abuse government programs and their funds. Just look to the health care industry and the shenanigans which continue to be performed by various actors if you need more evidence to support this contention.

While some bureaucratic checks and balances are definitely needed for E-Rate and other governmental programs, it is critical to evaluate HOW MANY checks and balances are needed, and whether those “safeguards” result in the tail wagging the dog when it comes to a funding program. E-Rate legislation was passed, from my understanding, largely through the lobbying efforts of our U.S. telecommunications companies. Certainly we have educational technology advocacy groups like the EdTech Action Network which lobby for more educational technology funding for schools not only from the vantage point of vendors but also from that of teachers, administrators, students and parents. I think, however, the funds of ETAN and other grassroots organizations are paltry compared to those of our telecommunications giants. The very limited goal and purpose of E-Rate, therefore, can be understood better when viewed with this lens. E-Rate has NEVER funded “end user equipment” for schools and libraries, “digital content,” or professional development. This means E-Rate funds provide discounted connectivity services for schools and libraries (think T-1 lines, T-3 lines, DS3 lines, etc) and infrastructure hardware “in the closet” required for wired and wireless connectivity, but funds cannot be used to purchase student computers, phones for teachers, etc. A percentage of videoconferencing equipment is generally available for an E-Rate discount, but not ALL the cost of that equipment since it equates to “end user equipment.” ISPs are not the only beneficiaries here, networking giants like Cisco Systems (who interestingly purchased the videoconferencing company Tandberg at the start of this month for $3 billion) have earned millions of dollars from the E-Rate program, and continue to do so.

I believe we need to view high speed Internet connectivity as a “basic service” provided within ALL our communities just as clean water, reliable electricity, and sewer/trash service is provided. Our community, state and national leaders need to take up this torch, because you can bet corporate leaders are not going to do it when their focus remains quarterly profits as well as long term ROI. We need to engage in conversations about these issues with the leaders of our existing rural utility cooperatives, which in many cases have huge “war chests” of dollars that could support the infrastructure build-out required to bring needed high speed connectivity to our rural communities.

It is my contention the strategic vision of the E-Rate program, as recommended by the GAO March 2009 report referenced above, is in dire need of revision. E-Rate funds should not simply provide connectivity for our schools, they also should be available to provide end user computer hardware for schools (like laptop computers,) digital curriculum content, AND professional development training for educators. We do not simply need our schools to be “connected” to the information superhighway. A robust, high-speed Internet connection IS a prerequisite for many of the blended learning activities in which our students and teachers should be engaging each week, but it is not a sufficient ingredient. We MUST make it an educational priority in ALL our states (not just in Maine) to put portable, wireless computing devices in the hands of every learner in grades 4 through 12 in the next five years. How can we fund this educational imperative? TitleIID ARRA funds and other stimulus funds are insufficient. We can’t look at this as a one-time, stimulus-fund supported initiative. It MUST be sustainable. One of the funding mechanisms for state-led 1:1 learning initiatives should be E-Rate.

Is the E-Rate Program in the United States broken? In some ways, yes. Broadband USA is a portal for ARRA funding related to connectivity and bandwidth, but again, we don’t need just “one-time, shot in the arm” funding programs. We need sustainable revenue streams to support robust and equitable blended learning opportunities for students, teachers, and community members around our nation. Can ARRA meet this need? No, it cannot. Invested strategically, ARRA funds can certainly help states and localities build capacity and infrastructure for more robust bandwidth and digital learning opportunities, but that connectivity is just part of the recipe we need to follow. End-user digital equipment (read: affordable and powerful student and teacher laptops) as well as sustained professional development for teachers are equally important pieces of this puzzle. That PD must also address other key educational stakeholders: School administrators and library media specialists.

E-Rate needs a new strategic vision. Will President Obama, those in his administration, and other elected leaders in our nation rise to this challenge and opportunity? I hope so. The future of our students and our nation is at stake.

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  • Larry

    Wes – a couple of concerns about your post. First, it actually seems you didn’t read the GAO report. One of the more striking findings of the report is that early 25% of Erate funds went unclaimed by districts/libraries. The left over funds are simply rolled over to the next year but that is exceedingly high for any government program. Second, the amount of support requested each year has always exceeded the total amount of funding available (see Table 2). So when you suggest that content, hardware, and professional develop should be included as “eligible services,” all you’re doing is increasing the strain on the program. So requests will be higher than the $2.25 billion cap which will just force USAC to further prioritize the allocation of services.

    The reason why the funds are only targeted for telecom, ISP, and internal connections is because those are the entities that pay into the fund. I’m not sure how it is fair to require AT&T to pay into a fund that a professional development provider gets to benefit from. So are you suggesting that Apple and Dell be required to pay into the USF in order to cover 1:1 expenses? You participate in many professional development sessions. Would you support a “PD fee” on your services to help increase USF funding for these services?

    With 1:1 – netbooks average around $300 per device (less than $100 per year if spread out over the life of the device). Is it the cost that is really preventing widespread use of 1:1? It really seems it is a matter of district priorities. These devices are affordable – leaders just haven’t prioritized their purchases in their budgets.

  • http://www.wesfryer.com Wesley Fryer

    Larry: I did scan the report, but I didn’t read every word. I did include in my post the following quotation from the original report, “Though unused funds are reallocated for use in future years, they are “still problematic,” notes the GAO’s report, “because they preclude other applicants from being funded” during the program year in question.” So I do acknowledge that key finding of the report: Lots of e-Rate funding has gone unclaimed in the past. That is one of the main points I was wanting to amplify by this post. I also pointed out the rollover of funds to future years, which was observed by others, but this doesn’t (in my view) mean that the large quantity of unclaimed funds isn’t a problem with the E-Rate program and system as it exists presently.

    I am confused by your statement, “…are the entities that pay into the fund.” I don’t think any companies pay into the eRate program funds at all: These are taxes paid by US consumers as part of our telecommunications bills. My point is that simply providing connectivity is insufficient to realize the promise and opportunities available via connected digital learning resources. Yes, professional development is essential. You are correct that I am a professional development consultant, but I think your question about whether a tax should be assessed on PD expenses to raise more funds for PD is not an apples to apples comparison. (pun acknowledged!)

    The telecommunications services which are paid for by schools are NOT the only taxed services which provide the pool of money used by E-Rate. ALL telecommunications services, both wired and wireless, are taxed to provide these funds. What is the REASON we ostensibly have the E-Rate program? I would contend it is to provide digitally interactive and enhanced learning opportunities for our students. My point remains, if that is our purpose and goal as taxpayers, citizens and leaders, then we need to acknowledge that connectivity alone cannot meet this goal and does not meet it. Other USAC programs, like RUS grants, do provide hardware and professional development. My point is we should reconsider the overall E-Rate program and its scope, since connectivity is not all we need to realize the goals of the program.

    In terms of priorities, I agree many of our districts don’t put a high value on 1:1 learning devices. Again, however, simply providing the hardware is not all we need. Professional development is also key. And that costs money too.

  • Larry

    Wes says: “I don’t think any companies pay into the eRate program funds at all: These are taxes paid by US consumers as part of our telecommunications bills.”

    I think you’re mistaken on a couple of points. First, the USF is funded out of fees paid by telecommunications companies based on their interstate and intrastate revenues (http://www.fcc.gov/omd/contribution-factor.html). Many, if not most, companies pass these fees onto their customers are part of their monthly bills. It is technically not a tax (only Congress, not the FCC, has the constitutional authority for raising/lowering taxes). However, it still has the effects of a tax – meaning that it distorts the actual cost of a service and it redistributes funding raised from one entity to another.

    When the FCC added internal connections to Erate eligibility it was a big deal because these providers don’t pay into the fund but they could get paid out of the fund. Meaning they got all the benefit for none of the cost. That’s the reason why internal connections is third in the priority list.

    Second, as for the reason we have the Erate, it’s clear in the legislation (http://www.law.cornell.edu/uscode/47/usc_sec_47_00000254—-000-.html) that the purpose was to provide discounted telecommunications services.

    Third, the RUS isn’t funded out of the Universal Service Fund but through congressional appropriations with legislation that allows for the spending of tax dollars on hardware, services, etc.

    So if you’re saying that we should reconsider the overall E-rate program and its scope, then you’re essentially arguing that we should add other eligible services. Since funding would have to be increased in order to accommodate the new demand in your revised program, one would assume that you’re increase the number of providers who have to pay into the fund – which I’m assuming are the ones who would benefit from it (thus maintaining USF principles).

    I guess I just worry about this approach. I’m not sure how raising rates on companies (which has the effect of a tax) is a way to increase its adoption or accelerate deployment. And I’m not sure it is good precedent to allow the FCC to set these rates for non-telecom providers.

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