How K-12 Schools Can Substantially Reduce the Cost of Telecommunications and Internet Services
 
June 18, 2001
 

E-rate

Public and private K-12 schools can greatly reduce the cost of installing and operating telecommunication and Internet services thanks to a relatively new government program. This program, commonly called the E-rate, provides a way for schools to reduce the cost of everything from basic telephone service to fairly sophisticated Internet services. In the 1996 Telecommunications Act, Congress expanded the definition of "Universal Service" to include the goal of telecommunication and Internet access for all primary and secondary schools, as well as independent libraries. Even though the program distributes over $2 billion per year in discounts, many schools have not taken full advantage of this program.

How Much Funding Is Available?

More than $2 billion is available each year, with the amount of funding available to an individual school dependent on which other schools apply and the services for which discounts are sought. Some states and school systems made full use of the program; many did not. Some examples of funding commitments for last year are:

California	$471,272,000
D.C.	$9,400,000
Florida	$53,436,000
Illinois	$114,261,000
Massachusetts	$35,490,000
New York	$267,586,000
Ohio	$60,904,000
Rhode Island	$4,293,000
Texas	$153,408,000
Washington	$17,498,000

What Types of Services Are Covered?

All commercially available telecommunication and Internet services are eligible for support, including but not limited to:

• traditional telephone services
• access services
• high-speed data service
• two-way video, including distance learning and video-conferencing
• wide-area nets (WAN)
• paging services
• local-area nets (LAN)
• Internet access and other information services
• e-mail
• internal connections (available if there is sufficient funding. Typically only the poorest schools qualify for internal connection discounts, which include, but are not limited to: routers, hubs, network file servers, wireless LAN)
• installation and maintenance of internal connections

What Is Not Covered?

The following services are explicitly excluded from support:

• voice mail
• personal computers
• software
• modems
• fax machines
• asbestos removal
• electronic publishing

How Does the Discount Work?

The amount of the discount a school can claim will depend on the poverty level of the school and whether the school is located in an urban or rural area. The greater the poverty level, the greater the discount. For example, poor rural schools can receive discounts equal to 90% of the cost of the services. An urban school with relatively few children enrolled in the school lunch program is eligible for minimum discounts of 20%.

To be eligible to receive a discount for supported services, the school must seek competitive bids from service providers. A school that enters into a qualified contract will be able to have the amount it pays to the provider reduced by the applicable percentage. The difference will be paid to the provider by the government.

A special provision of the plan provides that any funds the school receives from other sources will not detract from the amount of the discount. For example, where a project would cost $5 million and $2 million is available from the state and $500,000 is available from a private grant, the amount of the discount would still be calculated on the total $5 million. Therefore, if the school was entitled to a 50% discount, it would not have to pay anything out of its budget because the universal service fund would cover $2.5 million of the cost. State funding plus the private grant would cover the rest. However, the school must secure all funding prior to submitting its application, so that it is able to provide evidence of its ability to pay the non-discounted portion.

Who Is Eligible to Purchase Supported Services?

All schools (both public and private) that do not operate as a for-profit business, or that do not have an endowment of greater than $50,000,000, are eligible for the E-rate program. The term "school" includes individual schools, school districts, and consortia of schools and/or school districts.

What Are the Requirements Imposed on Schools?

A school receiving discounted services under the universal service support mechanism must:

• meet the statutory definition of an elementary or secondary school
• not sell, resell or otherwise transfer discounted services
• make a bona fide request
• use the service for educational purposes, and
• certify that it complies with the Children's Internet Protection Act (CIPA), if it receives discounts for Internet access or internal connections

Where Is More Information Available?

For more information, contact Mark J. Palchick at 202-419-2443 or by e-mail at mpalchick@hklaw.com.