Function

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The Schools and Libraries Program supports connectivity – the conduit or pipeline for communications using telecommunications services and/or the internet. Funding is requested under four categories of service: telecommunications services, internet access, internal connections, and basic maintenance of internal connections.

Discounts for support depend on the level of poverty and the urban/rural status of the population served and range from 20% to 90% of the costs of eligible services. Eligible schools, school districts and libraries may apply individually or as part of a consortium.

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Applicants must provide additional resources including end-user equipment (e.g., computers, telephones, etc.), software, professional development, and the other elements that are necessary to utilize the connectivity funded by the Schools and Libraries Program.

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Impact

Yearly requests for E-Rate funding almost triple the FCC's $2.25 billion limit.[1]: 7  At the beginning of 2005, over 100,000 schools had participated in the program.[2]: 58  In 2003, nearly half of the funding went to schools where more than half of the students received reduced-price lunches.[3]: 5 

Broadly, US Department of Education's nationally representative surveys show that between 1994 and 1999, internet access in public schools rose from 35% to 95%, and access in classrooms rose from 3% to 63%.[4]: 5 

Some studies have suggested that the E-rate program has had a positive impact on schools. A 2006 case study performed by the Benton Foundation found that E-Rate funding had a direct impact on classroom internet connectivity in four cities.[5] An evaluation of E-Rate in California by Goolsbee and Guryan showed a 68% increase in classroom connectivity per teacher but could not identify any impact on student achievement.[6]

A study concluded in 2005 by a University of Texas student under the supervision of economics professor Mike Ward, using regression analysis, showed the E-Rate program in Texas school districts to have positive effect on factors like test scores, graduation rates, and college admission rates.[7]

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Structure

Legal Authorization - Main article: Telecommunications Act of 1996.  The Schools and Libraries portion of the Universal Service Fund, more widely known as E-Rate, was authorized as part of the Telecommunications Act of 1996, section 254. The act called for universal service, meaning that everyone should have access to advanced telecommunications services at reasonable rates regardless of their location. Two measures were included to advance this goal specifically for libraries and schools.

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Telecommunications providers were ordered to supply their services to schools and libraries at discounted rates determined by the FCC.[8] More generally, the FCC was directed to establish rules "to enhance... access to advanced telecommunications and information services for all public and nonprofit elementary and secondary school classrooms, health care providers, and libraries".[8]

The FCC was given the authority to establish and periodically evaluate what services qualified for support under both measures according to four broad criteria.[8] Funding was to be provided by contributions from telecommunications providers through an unspecified but "equitable and nondiscriminatory" mechanism.[8]

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Implementation

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On May 7, 1997, the FCC adopted Order 97-157 as its plan to implement section 254 of the 1996 Telecommunications Act. The FCC determined that "telecommunications services, internet access, and internal connections", including "installation and maintenance", were eligible for discounted rates.[9]: 255  Internal connections were defined as "essential element[s] in the transmission of information within the school or library".[9]: 459  The level of discount that a school or library received would vary from 20% to 90% depending on the cost of services and level of poverty as measured by the percentage of students eligible for the national school lunch program.[9]: 498  The total amount of money to be disbursed was capped at 2.25 billion or 15%.[9]: 425 

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The FCC designed the application process to promote cost effective and accountable solutions. As a part of their applications, schools and libraries were required to conduct an assessment of their current technology resources and explain how they utilize them for their educational mission. This assessment had to be certified by an outside organization, preferably the state government. Schools and libraries were required to select vendors through a competitive bidding process publicized through a national website. Record-keeping requirements were instituted to facilitate audits.[9]: 572–581 

The FCC decided to fund E-Rate through the same pool of money collected for other Universal Service Fund, or USF, programs.[9]: 584  The new language in the Telecommunications Act of 1996 expanded the pool of companies required to contribute. The expanded pool included all companies that provided interstate telecommunications service to the public for a fee.[9]: 777  As of 1998, around 3500 companies contributed to the USF.[10]: 19  A company's contribution to the USF is based on its interstate and intrastate revenues from sales to end users.[9]: 843  Companies submit revenue projections, from which the contribution factor is determined and then assessed. This process takes place on a quarterly basis (How the USF Works). To preserve low-cost local phone service, companies are only permitted to increase interstate revenues to recoup their USF contribution costs.[9]: 843 

The National Exchange Carrier Association (NECA) managed the existing universal service fund, and in their initial authorizing order the FCC directed the NECA to temporarily administer E-Rate as well.[11]: 42  When the NECA was unable to agree on how to restructure its Board of Directors to reduce the influence of incumbent local exchange carriers, it instead proposed the creation of a subsidiary, the Universal Service Administrative Company, with a board composed of representatives from telecommunications providers and the USF recipient groups.[11]: 33 

In Order 97-253 the FCC agreed to this proposal.[11]: 12  The FCC also directed NECA to create two unaffiliated corporations to manage the schools and libraries and rural health care programs.[11]: 26  However, Senator Ted Stevens and the House Committee on Commerce soon inquired whether this violated the Government Corporation Control Act. The Government Accountability Office concluded that it did, and an amendment was added to s.1768 that required the FCC to restructure USF administration.[12]: 5  In response, the two new corporations were terminated and their responsibilities shifted to two new divisions within USAC.[13]: 2