Policy

After Net Neutrality, Experts Expect Changes to FCC’s E-Rate

By Stephen Noonoo     Jan 3, 2018

After Net Neutrality, Experts Expect Changes to FCC’s E-Rate

It’s no great overstatement to say that the Federal Communications Commission’s recent decision to rollback net neutrality protections has shaken the education community’s faith in open and equitable internet access for all students.

Among the groups commenting on the issue, both ISTE and the Consortium for School Networking (CoSN) raised the possibility that digital education providers can pay to deliver their content more quickly, and wondered aloud if the move would deepen the digital divide. ISTE’s CEO Richard Culatta told NPR the end of net neutrality was a regressive move, harkening to the pre-internet days and putting schools “back to where we were before, where students are getting shortchanged based on the zip code they live in.”

The FCC’s impact on education isn't limited to net neutrality, however. Rather, it's centered in the popular E-Rate program, which has provided billions of dollars in broadband discounts and infrastructure upgrades to schools and libraries. Since it began in the 1990s, E-Rate has helped bring high-speed internet access to 97 percent of U.S. schools. In 2014, the program was modernized, raising the overall annual funding cap to nearly $4 billion.

Last month, an article in from New America, a think tank, raised the specter that the FCC could overhaul the program once again, this time cutting funding. While Ajit Pai, the current FCC chairman, has generally spoken positively about the program, his commitment hasn’t been unwavering.

Early in his tenure, Pai revoked an Obama-era progress report praising E-Rate modernization. Pai also voted against modernization, citing concerns over mismanagement and new fees levied on consumers to pay for the funding increase. Instead, he argued for assigning E-Rate dollars on a per-student basis, with some extra funding for rural schools.

With net neutrality in the rearview mirror, is E-Rate next on the FCC’s chopping block? Experts admit it’s possible, if unlikely, but suggest a more probable series of modest changes in the short term.

“I understand there are concerns about Pai,” says John Harrington, CEO of the E-Rate consultancy Funds For Learning, which keeps close tabs on the program. “But the tea leaves for E-Rate are pretty positive actually.”

Why Demand Is Down

While Pai has sent mixed messages around E-Rate, Harrington is heartened by the fact that the FCC opened up a special filing window late last year for schools directly impacted by the recent hurricanes impacting the Caribbean. According to Harrington’s analysis, 19 schools in Puerto Rico applied for additional funding for infrastructure repair, requesting around $150,000. “It's not the sort of thing you do for something that you’re not supporting,” he says.

Despite the increased funding cap that came along with modernization, funding requests and committed dollars haven’t yet caught up. Following a spike in requests the first year after modernization, only about half the allotted $3.9 billion has been committed for 2017.

While there are still pending applications from 2016 and 2017 that could raise the committed dollar amount for those years, “the difference between demand and funding cap could be fueling some of the talk that the FCC may reduce the funding cap,” says Gary Rawson, who chairs the State E-Rate Coordinators Alliance, in an email to EdSurge. “If the FCC did reduce the funding cap it would not be a reflection of decreasing support for the program, but would more truthfully show support for fiscal responsibility by not collecting more Universal Service Funds than is needed by the program.”

The Universal Service Funds refer to the telecom fees collected by USAC, the Universal Service Administrative Company, that pay for E-Rate. USAC, a nonprofit, manages E-Rate’s day-to-day affairs. (The FCC merely oversees the program.)

Schools are requesting fewer E-Rate dollars for a number of reasons. As more schools complete large-scale networking projects, they no longer require as much Category 1 funding, which funds internet infrastructure and physical access to wide area networks. Additionally, broadband cost per megabit is dropping across the board, and schools are receiving more bids from telecom providers, making pricing more competitive.

Smart districts may have played a role in driving down costs as well. “It is worth noting that the competition is not between and among the traditional service providers,” Rawson says, but rather “from the districts who have discovered it is often cheaper to build out their own networks, with or without E-Rate support. This is leading the traditional service providers to lower their rates to keep those self-provisioned networks out of their territory.” (Overall, broadband costs in Rawson’s home state of Mississippi have dropped from $50 per megabit in 2006 to $.50 per megabit in 2017, he says.)

In some cases, the decision for schools to fund infrastructure projects without E-Rate is a pragmatic one. Schools can wait for up to a year to find out if their requests have been approved, and the complexity of the application process has led some to seek outside funding sources.

USAC’s E-Rate Productivity Center, the application portal schools use to submit requests, is often cited as another stumbling block. The portal, released alongside E-Rate modernization, was intended to simplify the process, but if anything, it’s made things more cumbersome for applicants. Last April, Funds for Learning called the system “extremely difficult to use, counterintuitive, and buggy.” That same month, Pai sent an open letter to USAC’s former CEO Chris Henderson outlining his concerns about the portal and other issues, noting “serious flaws in USAC’s administration of the E-Rate program,” adding the “current state of affairs is unacceptable.”

Henderson resigned last May and was recently replaced as CEO by Radha Sekar, the former chief financial officer for the U.S. Department of Agriculture’s Farm Service Agency, whose tenure begins this month. While at the USDA, Sekar oversaw a large IT-related initiative. “We think that’s pointing to the fact that USAC has had a lot of IT related issues making it hard for applicants to submit paperwork, and this new CEO has experience in making systems work more effectively,” Harrington says.

In Store for 2018

Immediate changes to the application process are unlikely, although it’s probably a longer-term goal. This year, the FCC could move to begin a more general process of “remodernizing” the program by making changes to Category 2 funding, which covers discounts to defray ongoing broadband service costs for things like hardwired internet access, Wi-Fi and basic equipment maintenance.

Already, discounts on voice and telephone service have been all but phased out by the FCC as part of its modernization efforts, and few schools are likely to bother requesting discounts in that area, Rawson says. The FCC has already begun soliciting comments on Category 2 funding, which operates on a five-year budget cycle ending in 2019. The multi-year cycle means that schools have several years to request their funding and do not necessarily request it evenly from year to year.

Specifically, the FCC asked for public comments regarding how schools were requesting and planning to use these funds, and whether there might be a simpler way to calculate funding going forward. To some, it was a jarring request given that the first budget cycle post modernization isn’t yet finished, and schools still have time to submit Category 2 requests for the cycle.

“We find it troubling that these questions about the formula are being asked before we have all the data,” says CoSN CEO Keith Krueger, who submitted comments together with Funds for Learning and the nonprofit EducationSuperHighway. “Some ideas that have been floated by Chairman Pai, such as a per-student formula, have serious unintended consequences for small and rural districts.”

So while a reduction in funding is possible, Harrington and others are hoping for a two-year pause to let the current Category 2 cycle play itself out. “My guess is if [the FCC] could get the administration of the program to run more effectively, you’ll see the demand rise,” Harrington says. “When the demand rises, they’ll see they need to keep the cap. It’s a crazy Catch-22 right now where it looks like the demand is lower than the cap.”

Perhaps fortuitously, the difficulty of making changes to a byzantine government program such as E-Rate may work to the benefit of schools. “Major changes to a program as large, complex and as beneficial as E-rate will take considerable time to implement,” Rawson says. In the meantime, “the E-Rate program must continue meeting the demands of the schools and libraries regardless of the IT changes they may be implementing. And I don’t think those changes could be used as an excuse to cut services or funding.”

Policy

After Net Neutrality, Experts Expect Changes to FCC’s E-Rate

By Stephen Noonoo     Jan 3, 2018

After Net Neutrality, Experts Expect Changes to FCC’s E-Rate

It’s no great overstatement to say that the Federal Communications Commission’s recent decision to rollback net neutrality protections has shaken the education community’s faith in open and equitable internet access for all students.

Among the groups commenting on the issue, both ISTE and the Consortium for School Networking (CoSN) raised the possibility that digital education providers can pay to deliver their content more quickly, and wondered aloud if the move would deepen the digital divide. ISTE’s CEO Richard Culatta told NPR the end of net neutrality was a regressive move, harkening to the pre-internet days and putting schools “back to where we were before, where students are getting shortchanged based on the zip code they live in.”

The FCC’s impact on education isn't limited to net neutrality, however. Rather, it's centered in the popular E-Rate program, which has provided billions of dollars in broadband discounts and infrastructure upgrades to schools and libraries. Since it began in the 1990s, E-Rate has helped bring high-speed internet access to 97 percent of U.S. schools. In 2014, the program was modernized, raising the overall annual funding cap to nearly $4 billion.

Last month, an article in from New America, a think tank, raised the specter that the FCC could overhaul the program once again, this time cutting funding. While Ajit Pai, the current FCC chairman, has generally spoken positively about the program, his commitment hasn’t been unwavering.

Early in his tenure, Pai revoked an Obama-era progress report praising E-Rate modernization. Pai also voted against modernization, citing concerns over mismanagement and new fees levied on consumers to pay for the funding increase. Instead, he argued for assigning E-Rate dollars on a per-student basis, with some extra funding for rural schools.

With net neutrality in the rearview mirror, is E-Rate next on the FCC’s chopping block? Experts admit it’s possible, if unlikely, but suggest a more probable series of modest changes in the short term.

“I understand there are concerns about Pai,” says John Harrington, CEO of the E-Rate consultancy Funds For Learning, which keeps close tabs on the program. “But the tea leaves for E-Rate are pretty positive actually.”

Why Demand Is Down

While Pai has sent mixed messages around E-Rate, Harrington is heartened by the fact that the FCC opened up a special filing window late last year for schools directly impacted by the recent hurricanes impacting the Caribbean. According to Harrington’s analysis, 19 schools in Puerto Rico applied for additional funding for infrastructure repair, requesting around $150,000. “It's not the sort of thing you do for something that you’re not supporting,” he says.

Despite the increased funding cap that came along with modernization, funding requests and committed dollars haven’t yet caught up. Following a spike in requests the first year after modernization, only about half the allotted $3.9 billion has been committed for 2017.

While there are still pending applications from 2016 and 2017 that could raise the committed dollar amount for those years, “the difference between demand and funding cap could be fueling some of the talk that the FCC may reduce the funding cap,” says Gary Rawson, who chairs the State E-Rate Coordinators Alliance, in an email to EdSurge. “If the FCC did reduce the funding cap it would not be a reflection of decreasing support for the program, but would more truthfully show support for fiscal responsibility by not collecting more Universal Service Funds than is needed by the program.”

The Universal Service Funds refer to the telecom fees collected by USAC, the Universal Service Administrative Company, that pay for E-Rate. USAC, a nonprofit, manages E-Rate’s day-to-day affairs. (The FCC merely oversees the program.)

Schools are requesting fewer E-Rate dollars for a number of reasons. As more schools complete large-scale networking projects, they no longer require as much Category 1 funding, which funds internet infrastructure and physical access to wide area networks. Additionally, broadband cost per megabit is dropping across the board, and schools are receiving more bids from telecom providers, making pricing more competitive.

Smart districts may have played a role in driving down costs as well. “It is worth noting that the competition is not between and among the traditional service providers,” Rawson says, but rather “from the districts who have discovered it is often cheaper to build out their own networks, with or without E-Rate support. This is leading the traditional service providers to lower their rates to keep those self-provisioned networks out of their territory.” (Overall, broadband costs in Rawson’s home state of Mississippi have dropped from $50 per megabit in 2006 to $.50 per megabit in 2017, he says.)

In some cases, the decision for schools to fund infrastructure projects without E-Rate is a pragmatic one. Schools can wait for up to a year to find out if their requests have been approved, and the complexity of the application process has led some to seek outside funding sources.

USAC’s E-Rate Productivity Center, the application portal schools use to submit requests, is often cited as another stumbling block. The portal, released alongside E-Rate modernization, was intended to simplify the process, but if anything, it’s made things more cumbersome for applicants. Last April, Funds for Learning called the system “extremely difficult to use, counterintuitive, and buggy.” That same month, Pai sent an open letter to USAC’s former CEO Chris Henderson outlining his concerns about the portal and other issues, noting “serious flaws in USAC’s administration of the E-Rate program,” adding the “current state of affairs is unacceptable.”

Henderson resigned last May and was recently replaced as CEO by Radha Sekar, the former chief financial officer for the U.S. Department of Agriculture’s Farm Service Agency, whose tenure begins this month. While at the USDA, Sekar oversaw a large IT-related initiative. “We think that’s pointing to the fact that USAC has had a lot of IT related issues making it hard for applicants to submit paperwork, and this new CEO has experience in making systems work more effectively,” Harrington says.

In Store for 2018

Immediate changes to the application process are unlikely, although it’s probably a longer-term goal. This year, the FCC could move to begin a more general process of “remodernizing” the program by making changes to Category 2 funding, which covers discounts to defray ongoing broadband service costs for things like hardwired internet access, Wi-Fi and basic equipment maintenance.

Already, discounts on voice and telephone service have been all but phased out by the FCC as part of its modernization efforts, and few schools are likely to bother requesting discounts in that area, Rawson says. The FCC has already begun soliciting comments on Category 2 funding, which operates on a five-year budget cycle ending in 2019. The multi-year cycle means that schools have several years to request their funding and do not necessarily request it evenly from year to year.

Specifically, the FCC asked for public comments regarding how schools were requesting and planning to use these funds, and whether there might be a simpler way to calculate funding going forward. To some, it was a jarring request given that the first budget cycle post modernization isn’t yet finished, and schools still have time to submit Category 2 requests for the cycle.

“We find it troubling that these questions about the formula are being asked before we have all the data,” says CoSN CEO Keith Krueger, who submitted comments together with Funds for Learning and the nonprofit EducationSuperHighway. “Some ideas that have been floated by Chairman Pai, such as a per-student formula, have serious unintended consequences for small and rural districts.”

So while a reduction in funding is possible, Harrington and others are hoping for a two-year pause to let the current Category 2 cycle play itself out. “My guess is if [the FCC] could get the administration of the program to run more effectively, you’ll see the demand rise,” Harrington says. “When the demand rises, they’ll see they need to keep the cap. It’s a crazy Catch-22 right now where it looks like the demand is lower than the cap.”

Perhaps fortuitously, the difficulty of making changes to a byzantine government program such as E-Rate may work to the benefit of schools. “Major changes to a program as large, complex and as beneficial as E-rate will take considerable time to implement,” Rawson says. In the meantime, “the E-Rate program must continue meeting the demands of the schools and libraries regardless of the IT changes they may be implementing. And I don’t think those changes could be used as an excuse to cut services or funding.”

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