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What is E-Rate?

What is E-Rate?

The business world is undergoing a digital transformation and technology is driving competitive advantages for companies versus their competitors.  This is all the more reason why students need access to the latest technologies in order to prepare themselves for a world that is increasingly driven by technological innovation.  Unfortunately, not all school districts have identical resources to fund the necessary IT infrastructure that is required.

This is the founding purpose of E-Rate.  E-Rate is a federally funded stream designed to make telecommunications and information services more affordable for schools and libraries.  This is especially important for rural and urban districts that lack the subsequent tax base.  E-rate is funded by the Universal Service Fund, which dates back to 1934.  At that time, it was used to subsidize telephone service to low-income households and high-cost areas.  Since then it has been expanded to include IT infrastructure as well.  The Schools and Libraries E-rate Program is funded by the Universal Services Fund which is supported by a Universal Service charge on consumer phone bills. 

The E-Rate program funds five service types:

  • Data Transmission Services and Internet Access
  • Voice Services
  • Internal Connections
  • Managed Internal Broadband Services
  • Basic Maintenance of Internal Connections

E-rate basically pays for pipeline infrastructure.  It does not pay for end user devices, servers or software.  The premise behind E-Rate is to keep up with the demand for bandwidth as school systems incorporate greater levels of digital learning into their curriculum, thus feeding the insatiable appetite for bandwidth.  E-rate fills a critical gap as illustrated by an FCC survey in 2015 in which nearly half of respondents reported lower speed Internet connectivity than the average American home for their school systems.  In December of 2014, the FCC set out to modernize the E-rate program by extending its covered services to Wi-Fi.  The current cap for E-rate is $3.9 billion for the current five-year budget ending in 2019. 

There are two categories of E-rate

Category 1

  • WAN Services such as leased high speed data circuits
  • Internet access
  • Wireless Internet access
  • Voice services such as PRI, Centrex, POTS and VoIP

(Note that Voice services will be phased out of the E-rate program by 2020)

Category 2

  • Cabling
  • Wireless access points, controllers and management software
  • Switches
  • Routers
  • Firewall appliances
  • UPS
  • Maintenance of Category 2 products

How Can Our Organization Obtain E-rate Benefits?

There are two facets to taking advantage of E-rate.  The first is eligibility.  In general, elementary schools, secondary schools, private schools and religious schools are eligible to receive discounts, as long as they have an endowment less than $50 million and are not for profit.  Public Libraries and library systems are also eligible to receive discounts as long as they meet the eligibility requirements for libraries.

All eligible applicants are then assigned a discount percentage.  The discount is based on the poverty and location of the population served by the school or library.   Discounts range between 20% and 90% and are determined by the following criteria:

  • whether the location is either urban or rural
  • what percentage of the student population is eligible for free and reduced lunch
  • whether the spending is for category 1 or 2

For instance, if over 75% of your student population is eligible for free and reduced lunch you would be eligible for a discount of 90% on Category 1 spending and 85% for Category 2.  You can find the breakdown for Category 1 spending by going to  USAC Discount Matrix

Once eligible, a school or library identifies the services it needs and submits a request for competitive bids to the Universal Service Administrative Company. The USAC posts these requests on its website for vendors' consideration. Once the deadline has passed for bids, the school or library goes about selecting its preferred vendor(s) and applies to USAC for approval for the desired purchases.  The competitive bid process must comply with all FCC rules as well as stand and local procurement requirements.  No vendor can obtain information that would give them a competitive advantage.  Once the work is complete, the vendor will submit a request to the USAC for reimbursement of the discount rate assigned to the project.

You must plan your E-rate projects well in advance of their implementation such as the purchase E-rate eligible products that would be used at a new school being constructed. There is a lot of great information on E-rate on the Internet as well as E-rate consultants that can guide you through the process.

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