New rules would eliminate eRate discounts on voice-related services within the next five years
[Editor’s note: This is the third in a series of articles examining the new eRate rules and how they will affect schools.]
If the Federal Communications Commission has its way, the eRate no longer will support voice services within the next five years, including plain old telephone service, toll-free service, and even voice over IP (VoIP).
This change could have a dramatic effect on school district budgets—and it likely will force school business and IT leaders to reexamine their options for voice-related services.
The eRate offers discounts ranging from 20 percent to 90 percent of the cost of telecommunications services, internet access, and internal connections (such as routers, switches, and Wi-Fi equipment) to eligible schools and libraries. Now indexed to inflation, the program will supply more than $2.4 billion in discounts this year.
The FCC’s new eRate rules  set aside $5 billion in funding over the next five years for the internal connections needed to extend broadband access within schools and libraries. To make this money available for internal broadband connections, however, the FCC has made significant changes to the kinds of services that are eligible for eRate support.
For instance, voice mail, paging services, and directory assistance no longer will be eligible for eRate discounts beginning next year. What’s more, funding for all voice-related telecommunications services will be phased out altogether over the next five years.
With the eRate currently supplying more than $800 million in discounts on voice-related services each year, that’s a significant amount of funding that schools stand to lose.
This phase-out will happen more quickly for some schools than others.
(Next page: How the phase-out will occur—and what it means for schools)
Beginning with the 2015 funding year, schools will see their discount percentage on eligible voice services reduced by 20 percentage points each year, until they no longer receive any voice-related support.
So, if your school district qualifies for a 90-percent discount on telecommunications services, next year you’d get a 70-percent discount on your phone bill. In 2016, you’d get a 50-percent discount; in 2017, you’d get a 30-percent discount; in 2018, you’d get a 10-percent discount; and in 2019, you won’t receive any eRate discounts on telephone service.
But if your school only qualifies for a 20-percent eRate discount, you’ll get no eRate support for your phone bill next year. Even the poorest schools will only have four more years of eRate discounts on voice-related services—and most schools will have only one or two more years of voice support.
This rule change is controversial, and many school leaders had urged the FCC not to adopt it.
“If phone service is eliminated from the program, we have school districts that will absolutely have to make a choice between funding infrastructure and keeping teachers,” wrote John W. Hughes III, president of the New Hope Technology Foundation, in comments filed with the agency earlier this year. “This is particularly true for our small, rural districts.”
The five-year phase-out of voice support isn’t set in stone. The FCC says it will evaluate the effects of this change after two years and will decide at that time whether to continue.
In making this change, the FCC aims to transform the eRate from a telecommunications program to a broadband program. The agency acknowledges that schools will have to pay more for voice-related services, but the savings they’ll realize on broadband services could help offset this cost, officials say.
Although hosted VoIP service no longer will be eligible for eRate support, some observers think the new rules create a key opportunity for VoIP providers like Cisco, Mitel, Shortel, 8×8, and others.
John Harrington, president of the eRate consulting firm Funds For Learning , believes the new rules might strengthen the business case for VoIP, because without eRate support for phone service, schools will need to explore more cost-effective options for their voice services—and VoIP lets them leverage their investments in their broadband networks in a very cost-effective way.
“If you can reduce your phone bill, you’ll need to now more than ever,” Harrington said. “This could help accelerate the adoption of VoIP.”
(Next page: Advantages—and limitations—of VoIP)
8×8  is one of many companies that provide “communications as a service,” said Huw Rees, vice president of customer advocacy for 8×8. He said the only equipment schools need to take advantage of the company’s service are IP phones, “softphone” software for making a call through a Mac or PC, or a mobile app for iOS or Android devices. All the necessary call routing software resides in the company’s data centers, so there is nothing for schools to maintain.
8×8 charges schools on a per-extension basis, and its VoIP service includes features such as auto-attendant service (call routing) and voice mail to eMail. These additional features are bundled into the cost of the service, which averages $20 to $25 per extension, per month, Rees said.
Schools looking for more affordable voice options “should definitely do the math” when comparing services, he said—but he argued that a hosted VoIP solution can be “not just less expensive, but also much easier to budget for.” With a premise-based solution, such as a private branch exchange (PBX) system, schools could incur extra costs for adding, changing, or replacing services, he explained.
Potential benefits aside, some school leaders have concerns about the availability of VoIP solutions in an emergency.
“Landline phones are required for essential safety features such as elevator car communications in the event of a breakdown and connections of emergency services in the event of disaster,” said Lachlan Tidmarsh, chief information officer for the Chicago Public Schools, in comments to the FCC.
Jennifer Gardner, director of IT, finance, and subsidies for the School District of Philadelphia, wrote this to the FCC: “The telephony infrastructure in all [Philadelphia] schools was designed around current eRate program rules, and … the elimination of voice telephone service as an eligible service would be of great hardship and would pose a direct risk to the safety and security of students and teachers.”
She continued: “Traditional voice service … is a proven, reliable, and cost-effective solution for bringing telephony services to schools and classrooms. … [We’ve] found that even the largest telecommunications carriers in Philadelphia still cannot deliver VoIP-based telephony to buildings and/or directly to classrooms in a more cost-favorable manner than traditional analog services.”
Part four of this series will look at the impact of the new eRate rules on email and web hosting services. Part five will examine other rule changes, including a new way to calculate your discount percentage. Watch www.eschoolnews.com  every Tuesday through Sept. 9 for more information.