Is it time to recreate the E-rate program?

• Author: Holt, Lynne

1. INTRODUCTION II. ARGUMENTS FOR CHANGE III. WHAT MIGHT A NEW E-RATE PROGRAM LOOK LIKE? IV. BACKGROUND OF THE SCHOOLS AND LIBRARIES (E-RATE) FUNDING MECHANISM V. ON THE RESIDENTIAL FRONT PART VI. WHY IS COMMUNITY INTERNET ACCESS IMPORTANT? VII. CRITICISM OF THE E-RATE PROGRAM VII. CONCLUSION A. New Priorities B. Sustainability Transition C. High Need and Emergency Support D. New Administrative Mechanism E. Program Outcomes I. INTRODUCTION

   The Schools and Libraries Program, commonly known as the "E-rate" program, was created by the FCC in 1997, (1) as authorized by the federal Telecommunications Act of 1996 ("1996 Act"). (2) The 1996 Act specified for the first time that schools and libraries are eligible to receive universal service support to enable use of "advanced telecommunications services" in support of their education missions. (3) The Universal Service Fund ("USF") is the repository for revenue generated from mandatory charges levied by the FCC on most telecommunications companies that provide interstate telecommunication services. (4) A carrier's contribution is based on its end-user telecommunication revenue and the FCC's calculation of the USF's revenue needs. (5) Each carrier's assessment may be collected from customers. (6)

   In its initial order implementing the universal service mandate of the 1996 Act, the FCC authorized financial support for schools' and libraries' telecommunications services in general, as well as Internet access, internal network connections, and maintenance of those connections aimed at meeting the "advanced telecommunications and information services" provisions of the 1996 Act. (7) The FCC designated telecommunications services and Internet access as priority one services, eligible for funding before allocation of support to projects for internal network connections and maintenance of those connections (priority two services). (8)

   The E-rate program provides eligible schools and libraries with discounts of 20-90 percent from the rates charged by providers for the covered services. (9) The total outlay for those discounts is controlled by an annual cap imposed by the FCC in the 1997 Universal Service Report and Order, (10) which was subjected to indexing for inflation beginning in funding year 2010. (11) That first year indexing resulted in an increase to $2.27 billion for the program from the prior capped amount of $2.25 billion. (12) In 2010, disbursements for the program represented nearly 29 percent of total USF disbursements. (13)

   Since authorization of the E-rate program in 1996 and its implementation pursuant to the 1997 Universal Service Report and Order, much has changed in both the access to and use of Internet-based services in this nation's public schools and libraries. Connectivity no longer is available almost exclusively from wireline telecommunications carriers as it was in 1997. Technological changes have made wireless connectivity widely available. Broadband is also deployed by satellite providers, cable companies, and dark fiber providers. Telecommunications services have been increasingly deregulated at both the state and federal levels. (14) Residential access to broadband services has expanded, as explained in greater detail below. Greater residential access has changed the relationship between schools and libraries, both to their onsite and offsite patrons. Homework assignments and other elements of the curriculum increasingly require access to broadband services, as do a growing number of government transactions and the retrieval of online information available at libraries. These and other changes raise the question of whether the E-rate program, its priorities, and the form in which subsidies have been historically provided might need to be revisited.

   The FCC's National Broadband Plan, released in May 2010, appears to reflect the need for some type of reform to the E-rate program that recognizes the changes in the nature of broadband service delivery since the program began and that also focuses on new content and learning systems enabled by expanded broadband access. (15) Among the goals articulated in the National Broadband Plan is improvement of "the connectivity to schools and libraries by upgrading the FCC's E-[r]ate program to increase flexibility, improve program efficiency and foster innovation by promoting the most promising solutions." (16) Of particular interest is the articulation of goals aimed at creating "digital content and learning systems, removing regulatory barriers and promoting digital literacy." (17) Specifically, the FCC seeks (through the National Broadband Plan) to ensure that anchor institutions, such as schools and libraries in communities across the nation, have access to very high-speed broadband service. (18)

   Due to the magnitude of change in the educational and technological landscape since 1997, it is time for Congress and the FCC to reconsider the E-rate funding priorities for schools and libraries and the way the support is provided. This Article is organized into seven sections. Part II presents the case for change in the scope and type of support provided for schools and libraries. The near ubiquitous availability of telecommunication and Internet services makes this an opportune time to consider a more targeted approach to supporting these institutions. Part III describes what a reconfigured E-rate program would encompass in terms of services and institutions served. Part IV describes the current E-rate funding mechanism. Part V describes the current state of residential Internet access and relates changes in the availability of those services to the need for a revamped E-rate program. Part VI presents the case for continued support of Internet access through educational institutions. Part VII describes the ongoing debate about the effectiveness of the E-rate program. Part VIII concludes the discussion with recommendations for refocusing the use of the current allocation of USF support for schools and libraries to more effectively meet the needs of people who cannot afford residential access to Internet services.

2. ARGUMENTS FOR CHANGE

   Internet access at schools and libraries has expanded significantly since the inception of the E-rate program, both in terms of population served and bandwidth deployed. (19) Virtually all schools and libraries have both telephone service and Internet connectivity, which are the priority one services supported by the E-rate program. (20) As reported in the National Broadband Plan, 97 percent of schools are connected to the Internet, many by virtue of E-rate support. (21) A 2006 study published by the National Center for Educational Statistics found that by 2005, 94 percent of instructional rooms in public schools had Internet access and that 97 percent of public schools with Internet access used broadband services to achieve Internet connectivity, up from eighty percent in 2000. (22) Results of a 2010 survey commissioned by the FCC show that all E-rate recipients who responded (schools and libraries) have Internet connections. (23) Most (95 percent of survey respondents) reported terrestrial broadband connections to at least one facility; the remainder used dial-up (3 percent) or satellite services (2 percent). (24) Based on these findings, one could argue that the goal of universal access to the Internet for schools and libraries was achieved a number of years ago. This high level of connectivity suggests that stimulating demand for telecommunication service access by schools and libraries may be a less pressing need now than it was a decade ago. Thus, the FCC's priority two--internal connections and their maintenance--should be combined with access to truly high-speed service as a new top priority for the E-rate program. Recommendation 11.6 in the National Broadband Plan specifically states that "the FCC should develop ways that [priority two] funding can be made available to more E-rate applicants." (25) Consistent with that recommendation, the FCC recently ordered the funding administrator to make funding year 2010 E-rate support available for priority two services at all discount bands. (26)

   Popular support for the "access" focus of Internet and broadband support programs appears to be waning. The Pew Research Center Home Broadband 2010 report found that support for government efforts to expand broadband access is low overall: "[w]hen asked whether expanding high speed access to everyone in the country should be a priority of the federal government, one in ten Americans (11 percent) say that it should be a 'top priority' while three in ten (30 percent) feel that it is 'important, but a lower priority.'" (27) Over half (53 percent) of respondents to the Pew Research Center survey said that "expanding affordable high-speed interact [sic] access to everyone in the country" is "[n]ot too important" or "[s]hould not be done." (28) Interestingly, survey respondents without Internet access were less supportive of government efforts to encourage high-speed access than those with access. (29) Arguably, if government support of broad-based access to broadband and the Internet is not acceptable to the public, a narrower focus on access via community facilities such as schools and libraries may be more palatable, although the Pew Research Center survey did not ask a question about the acceptability of support for community facility access.

3. WHAT MIGHT A NEW E-RATE PROGRAM LOOK LIKE?

   At least two high-level options exist for altering the E-rate program to recognize the changes that have occurred since 1997. The first option would be based on the finding that the demand-side universal service goal for schools and libraries has been achieved. It would declare that the mission was accomplished, end the E-rate subsidy, and reduce the USF by the amount allocated to the E-rate program (approximately $2.25 billion annually). If the current level of technological services...