Requests for eRate discounts have fallen for the second straight year. Nearly 40,000 applicants requested a total of $3.65 billion in funding discounts in 2005, down about $600,000–or 15 percent–from last year, according to the Schools and Libraries Division (SLD) of the Universal Service Administrative Co. (USAC).

The group, which administers the $2.25 billion-a-year program under the direction of the Federal Communications Commission (FCC), attributed the decline at least in part to a new rule that prohibits schools from applying for internal connections–the wiring, routers, switches, and network file servers necessary to bring the internet into classrooms–more than twice in any five-year period.

“There’s no doubt that the new two-in-five rule & had something to do with the declines we’re seeing this year,” said SLD spokesman Mel Blackwell. He also attributed this year’s decrease to the fact that most schools today already have the necessary infrastructure in place: “Over the last several years, [districts] have wired up a lot of schools. Now, instead of having to wire, say, 50 buildings, they might only need to do five.”

Though the $3.65 billion in funding requests is down significantly from the $4.28 billion requested in 2004, it’s still well above what the agency likely will have on hand to disperse this year.

About $1.57 billion was requested for Priority One services, or telecommunications services and internet access–roughly the same as last year. The remaining $2.08 billion of this year’s requests were for Priority Two services, or internal connections. That category was expanded last year to include basic network maintenance costs. In 2004, requests for internal connections-related services, not including maintenance, totaled $2.67 billion.

These funding requests do not accurately reflect how much money the SLD will need once its starts the approval process.

“There are several factors that will ultimately reduce the funds requested from the estimated level,” wrote SLD Vice President George McDonald in his letter to the FCC informing the commission of this year’s requests. McDonald said duplicate funding requests, incomplete applications, and a review of eligible services “will further reduce the demand.”

Despite the drop in demand, the SLD says it does not expect to be able to fund Priority Two requests that fall below the 80-percent discount threshold.

A bill to keep the money flowing

On Capitol Hill, lawmakers have introduced a bill that would permanently exempt the eRate from the Anti-Deficiency Act. The law, which stipulates that government entities must have money in hand before promising it, forced the SLD last fall to temporarily stop mailing important funding commitment letters to school districts–and cast doubt, at least temporarily, over the fate of several eRate-funded programs.

The money started flowing again when lawmakers agreed to give the eRate a temporary yearlong exemption to the law, while Congress sought a permanent solution to the problem.

The bipartisan bill, S. 241, is sponsored by Sens. Olympia Snowe, R-Maine, and John Rockefeller, D-W.V. Snowe and Rockefeller were behind the creation of the eRate in 1996.

“This bill will enable us to continue making progress in closing the country’s digital divide. Our schools, libraries, and telephone consumers–particularly in rural areas–need telecommunications services that are affordable, and this bill will provide these,” said Rockefeller in a statement.

The Universal Service Fund (USF)–the federal coffer from which the eRate draws its money–is funded through charges assessed to telephone companies on interstate calls, not through congressional appropriations, and as a private company, USAC was never required to comply with the Anti-Deficiency Act. Instead, USAC followed the same accounting rules that are used by the private sector.

That all changed last year when, under advisement from the federal Office of Management and Budget, the FCC ruled that the USF is, indeed, subject to the requirements of the act.

If S.241 fails to pass by the end of this year, the USF accounting change would come back into effect, causing an increase in telephone fees to all residential and business customers, while depriving eligible schools and libraries of eRate funds, the bill’s supporters say.

Though hearings were held before the Senate Commerce Committee in April, lawmakers have yet to consider the bill.

See these related links:

Federal Communications Commission
http://www.fcc.gov

Schools and Libraries Division
http://www.sl.universalservice.org