News

eRate changes aim to cut costs, boost efficiency

By Dennis Pierce, Special Projects Editor, eSchool News
September 16th, 2014

New rules encourage greater eRate transparency, volume purchasing

erate-savings

Greater transparency wasn’t the only rule change intended to control costs.

[Editor’s note: This is the sixth and final article in a series examining the new eRate rules and how they will affect schools.]

Starting next year, eRate applicants will be able to see how much other schools are paying for similar kinds of services, under one of many changes designed to keep costs down and simplify the nation’s school wiring program.

This greater transparency into eRate contracts could lead to better pricing on telecommunications services, internet access, and internal connectivity for U.S. schools and libraries.

The eRate provides discounts ranging from 20 percent to 90 percent of the cost of these services to eligible schools and libraries. Now indexed to inflation, the program will supply more than $2.4 billion in funding this year.

To transform the program into a vehicle that supports broadband in schools, the Federal Communications Commission this summer issued several new eRate rules.

One change requires the Universal Service Administrative Co. (USAC), the agency that administers the eRate, to post information about the services bought by applicants—as well as these line-item costs—on its website for the 2015 funding year and beyond.

To do this, USAC will work to standardize the information required in Block 5, Item 21 of the Form 471 eRate application.

Many service providers balked at this idea when it was first proposed, arguing that it could lead to unintended consequences—such as higher prices and less competition.

“Competition would suffer if vendors were allowed to see each other’s pricing,” eChalk wrote in comments to the FCC last year. Sprint suggested there was “a risk that publicly posting rate information could … facilitate price fixing or coordinated pricing.”

But the FCC was unmoved by these arguments. “Given the level of public scrutiny of the eRate program, we think price transparency will shine a light on any anti-competitive behavior,” it wrote in explaining its decision.

Keith Krueger, chief executive officer of the Consortium for School Networking, said the new transparency rule would eliminate the secrecy about pricing and should lead to better deals for eRate applicants.

“It’s been hard for schools to know if they’re getting a good deal on eRate-eligible services,” he said. “This will help drive questions of service providers, like: ‘Why were you able to give this district this price?’”

Some commenters had expressed concern that state laws, local regulations, or existing contracts might not allow for pricing disclosure. In response to these concerns, the FCC said applicants can opt out of this disclosure if they can demonstrate an explicit need.

Greater transparency wasn’t the only rule change intended to control costs. Other changes are designed to encourage better eRate pricing through master contracts and volume bidding.

(Next page: More details about these changes—as well as new rules designed to simplify the application process)