Because of the extraordinarily high demand for eRate discounts this year, the Federal Communications Commission has proposed changing the priority for discounts, so that schools and libraries not receiving funds for internal connections last year would have priority this year.

The demand for Year Four of the eRate–which runs from July 1, 2001 to June 30, 2002–is more than double the amount available. The Schools and Libraries Division (SLD) of the Universal Service Administrative Co., the group that administers the program, received 37,188 applications from schools and libraries requesting $5.195 billion, when the cap is set at $2.25 billion.

The existing rules for administering the eRate say requests for telecommunications services and internet access have first priority, and requests for internal connections, beginning with the most economically disadvantaged schools and libraries, have second priority. After these priorities have been met, any leftover funds continue to be distributed to the neediest applicants first.

Considering the number of applications received, the FCC has determined that after funding first-priority requests, there will only be about $900 million left for second-priority requests–not enough to fulfill even those requests from applicants who qualify for 90-percent discounts.

“The commission did not envision demand for the schools and libraries universal service support mechanism at the level we are currently experiencing,” stated the proposed rule-making notice released April 30 by the FCC. “The commission anticipated that the fund would provide full support for telecommunications services and internet access, and would provide support for internal connections for the neediest applicants.”

For three out of four years, there hasn’t been enough money to fund all eRate requests, said Julie Tritt, executive policy specialist for the Pennsylvania Department of Education and part of an informal group that advises the FCC and SLD on eRate issues. “This year, they didn’t even have enough money to fund an entire discount band.”

The estimated $900 million left over for internal connections would fund only two-thirds of requests from applicants in the 90-percent discount band, Tritt said. So why doesn’t the FCC just increase the $2.25 billion cap?

“It’s their sentiment that the $2.25 billion cap is pretty high already,” Tritt said. The FCC is charged with finding a balance between helping schools connect to the internet and making sure people’s phone bills don’t increase. The eRate is paid for by fees collected from telecommunications companies, which pass the cost onto their customers in the form of a surcharge.

If the FCC does not change its current rules, the funds would be distributed pro rata, meaning each school or library in the highest discount band would receive only a portion of the funds it requested. If there were enough money to fund only 66 percent of requests, then applicants would get only 66 percent of the amount they asked for.

“If applicants were to receive only a pro rata portion of the support they requested, schools and libraries might not receive sufficient funding to permit completion of a useful system of internal connections. As a result, schools and libraries would be in a position of hiring contractors to perform only a portion of an internal connection project,” the FCC said in its notice.

As a solution, the FCC has proposed giving priority to requests for internal connections made by individual schools and libraries that did not receive funding commitments for internal connections during the previous funding year.

Under this proposal, applicants who received funding for internal connections in Year Three would not be eligible in Year Four, but they could apply for discounts the following year. In its notice, the FCC said it was concerned that some applicants eligible for 90-percent discounts might receive funding for multiple years, while others that are also economically disadvantaged–but to a lesser degree–might not receive any discounts at all.

“We tentatively conclude that this approach would be more consistent with the commission’s commitment to ensuring that discounts under this support mechanism are targeted to the schools and libraries with the greatest need,” the notice said.

“It’s certainly a viable alternative to giving every 90-percenter 66 percent of what they asked for. It might be a more equitable approach to who hasn’t gotten funding,” Tritt said.

“Certainly there will be some disappointed schools, but there will also be some happy schools,” she added. “There are always winners and losers in every proposal.”

Extra time for wiring projects

In addition, the FCC has proposed giving schools and libraries three extra months to implement contracts or agreements with service providers for nonrecurring services. The deadline for completing these one-time projects would be extended from June 30 to Sept. 30. This would apply to Year Three of the eRate and all subsequent years as well.

Currently, eRate discounts must be implemented within the funding year they were granted.

“We find that many schools and libraries have been unable to meet the June 30 implementation deadline in previous years due to a variety of reasons, including delays in funding commitments and events beyond the service provider’s control, such as manufacturing delays and natural disasters,” the notice said.

The extension is “something they’ve done every year,” Tritt said. “We kept asking for it year after year. We thought it would be easier on schools and on the FCC if it was permanent.”

Links FCC’s Notice of Proposed Rule-Making

FCC’s Electronic Comment Filing System