Four Steps Towards E-Rate Connectivity and Competition

Benton Institute for Broadband & Society

Wednesday, March 11, 2020

Digital Beat

Four Steps Towards E-Rate Connectivity and Competition

Jon Sallet

A quarter-century ago, the idea of “educational technology” popularized the notion that children would benefit if computers in schools and libraries were connected to the internet. In 1996, Congress created the Federal Communications Commission’s E-Rate program, which provides discounts to libraries and K-12 schools to make broadband internet access more affordable.

In 2014, the FCC modernized the program in order to bring more bandwidth, at competitive prices, to every school and library by:

  • Setting a connectivity goal to meet the rising demands of instruction. The FCC established for schools the goal of 100 Mbps per 1,000 students for the 2014–15 school year and the goal of 1 Gbps per 1,000 users for the 2017–18 school year, and, for libraries, “an internet access target of 100 Mbps for libraries that serve fewer than 50,000 people and 1 Gbps for libraries that serve 50,000 people or more.” The FCC also began to fund connectivity within schools and libraries through discounts that cover internal network connections like Wi-Fi.
  • Empowering schools and libraries to take advantage of competition to drive down the cost of connectivity by:
    • Endorsing so-called “special construction,” which allows a school or library to obtain better prices than those set by incumbent providers through a competitive-bidding process that welcomes the construction of fiber and the use of dark fiber. The FCC’s decision also encouraged special construction by allowing additional support from state matching grants, which were quickly established.
    • Establishing new transparency requirements that empower schools to negotiate better deals by providing information on what other schools are paying for their bandwidth.
    • Encouraging the use of buying consortia to allow schools and libraries to aggregate their purchasing power.
  • Expanding the E-Rate program’s budget cap from $2.4 billion per year to $3.9 billion per year—a $1.5 billion increase.

In the succeeding years, K-12 schools have almost met the FCC’s 2014–15 short-term goal of fiber connections to every school, 100 Mbps per every 1,000 students and staff, and Wi-Fi in every classroom. But 1,356 schools across the nation still do not have access to sufficient broadband to meet the FCC’s short-term goal, which affects 2.3 million students. Even more students are impacted by the reality that only 28 percent to 32 percent of K-12 schools meet the FCC long-term goal of at least 1 Gbps per 1,000 students and staff.

The progress of libraries is less certain; as of 2014, only 18 percent of public libraries had broadband connections delivering 1,000 Mbps (1 Gbps) or more; about 41 percent had service delivering 10 Mbps or less, the great majority of which was actually 1.5 Mbps or less.

But there’s more we can do to improve the effectiveness of the E-rate program.

1. Special Construction Offers More Competition and Lower Costs

As community anchor institutions use more broadband capacity, the importance of ensuring their access to competitively priced services becomes increasingly important. A CoSN study found that 46 percent of schools identified “funding” as a significant factor in their ability to achieve E-Rate goals and nearly half identified the “cost of monthly reoccurring ongoing expenses” as a barrier. Similar cost challenges are faced by rural health-care clinics and rural libraries.

More competition is the answer. The cost of K-12 internet access declined 85 percent between 2013 and 2018. As EducationSuperHighway reported, the price drop came from the competitive opportunity presented by E-Rate-funded special construction, which presented alternatives beyond those supplied by incumbent providers. The authorization of special construction was a significant step, moving E-Rate from primarily supporting recurring service costs delivered by incumbent providers to encouraging competition by allowing the cost-effective purchase of competitive alternatives. So, for example, the construction of a new fiber network, when amortized over its useful life, may cost less than the monthly price charged for service by an incumbent broadband provider. And, when that happens, special construction not only delivers the best deal to schools and libraries (and the federal government) but also expands the deployment of fiber in a community.

Unfortunately, the Universal Service Administrative Company (USAC) has delayed the use of special construction, discouraging and frustrating schools as they attempt to gain the broadband connections their students need.

As explained in a 2019 Benton white paper, the use of undisclosed criteria to assess E-Rate applications and the targeting of special construction applications looks to be a secret shift in policy away from the 2014 Modernization Orders, which remain the law of the land. E-Rate special construction projects, chosen through a competitive bidding process, have been rejected by USAC without meaningful explanation and apparently on the basis of an undisclosed cost model. Nothing in the FCC’s policies authorize USAC to administer its duties through a hidden process, based on non-transparent criteria. This is a recipe for arbitrary outcomes and hidden preferences, especially if the rejection of special construction projects represents undisclosed and unjustified opposition to “overbuilding”—which should be called by its real name: Competition.

The reality is that school districts have little recourse when they are subjected to a long and opaque review of their E-Rate applications that stretches through multiple school-budget cycles. But their K-12 students understand the impact. As one third-grader in a remote Montana school that was seeking E-Rate funding wrote:

We should have the internet by now. We can’t do anything without the internet. We should be able to learn important stuff, but we can’t do cool stuff and cool projects on our computers.

We need internet or otherwise we can’t learn new things about stuff we don’t know on computers. We would like to do reports about Rosa Parks and Martin Luther King, Jr. on the internet, but we can’t do that.

In places where E-Rate support for special construction has arrived, local governments have realized tangible achievements. For example, the Apache County School Consortium in Arizona, working with a broadband provider owned by the Navajo Tribal Utility Authority, is deploying fiber-based broadband connectivity to seventeen schools. Similarly, in southern Illinois, Jefferson County’s Field Community School District 3 was able to move from a 25 Mbps connection (costing $700 per month) to a 1 Gbps fiber connection (costing just $96 per month).

Special construction is especially important to rural schools and libraries. In funding year 2018, schools and libraries sought $430 million for special construction; a majority of these applications came from rural communities.

2. Buyer Consortia Can Lower Costs and Should Be Encouraged and Expanded

Volume purchases often lead to lower per-unit costs. That’s just common sense (and familiar economics). Go into a grocery store and compare the price of eggs (in this case, store-brand, organic eggs) and discover that a half-dozen eggs go for 57 cents per egg, a dozen eggs cost 47 cents per egg, and a carton of eighteen eggs is priced at 44 cents per egg. Same eggs, same brand, but you buy more and get a lower unit cost.

Through aggregated procurement and purchasing programs at the state or regional level, groups of anchor institutions can combine their purchases:

  • North Carolina, for example, has successfully implemented just such an effort.
  • Georgia’s state library system analyzed the benefits and restrictions associated with various organizational options, including a statewide library consortium and a managed network, and decided “to take advantage of market changes on a statewide scale” by forming “mini-consortiums along vendor lines” while also using statewide opportunities when they would be more efficient.
  • The Connecticut State Library established a statewide buying consortium to enable all libraries in the state to use one request for proposal (RFP) for the purchase of leased lit fiber, leased dark fiber, or self-provisioned dark fiber.
  • Minnesota’s Broadband Task Force Report recommends that the state prioritize funding its regional library systems so that libraries can benefit from “economies of scale providing greater effectiveness, improved quality and access to more resources.”

Expanding the ability of a broad range of community anchor institutions to purchase connectivity would lower the cost of broadband. One in twenty schools still pays more than $50 per Mbps per month, and another 25 percent of schools pay between $5 and $50,633 even at a time when the median costs per Mbps for K-12 schools has fallen to $3.26.

3. Improved Administration Would Expand the Reach of E-Rate and Lower Costs

E-Rate administration improvements would speed the deployment of broadband to schools and libraries across the nation. As Jennie Stapp, the State Librarian of Montana, says, only a handful of that state’s libraries participate in the E-Rate program because, from their perspective, “the return on investment is just not there.” For example, confusion over the approval process for special construction projects has led to excessive application evaluation delays, some of which remained unresolved by the start of the application process of the following year and, as noted previously, may be the result of undisclosed opposition to the notion of special construction that the FCC has expressly authorized.

In addition, better administration would mean that more community anchors could enjoy the discounts their communities deserve. EducationSuperHighway’s analysis of E-Rate efforts demonstrates that many schools eligible for E-Rate support do not seek it. Smaller libraries may not have the necessary mix of administrative resources and grasp of local broadband issues and technologies to do so. Some schools and libraries believe that the administrative process is too burdensome.

4. State and Local Efforts Magnify the Positive Impact of E-Rate

E-Rate is a federal program that benefits schools and libraries across the country. But states can help their schools and libraries take advantage of E-Rate by assisting with applications, providing additional funding, and creating their own research and education networks that can, for example, include local universities not eligible for the K-12 support offered by the E-Rate program.

Application Assistance. Some states—such as Virginia, New Mexico, and Nevada—provide resources and application assistance to help ensure that their local schools and libraries can better access the E-Rate program. Utah provides assistance to anchor institutions that helps them qualify for funding (such as E-Rate) and aggregates their purchases to reduce the cost of broadband. Georgia has worked with the University System of Georgia’s Information Technology Services to provide training and assistance with E-Rate applications. State E-Rate coordinators are also working together to share program strategies, provide support, and shape program development.

Supplemental Funding. Numerous states provide financial resources to improve the broadband connectivity of their community anchor institutions. Twenty-four states created matching funds to assist schools and libraries seeking E-Rate support for special construction projects (as discussed later). Such state efforts can remove an up-front financial barrier to fiber deployment in less-advantaged schools because the combination of E-Rate funds and a state E-Rate match can equal 100 percent of the up-front costs of construction. Georgia encourages its libraries to participate in E-Rate by funding expenses that remain after E-Rate discounts are applied to broadband connectivity costs. In 1999, Maine created its own subsidy program to support broadband services for its schools and libraries. Several other states—Wisconsin, Missouri, Oklahoma, Arizona, and Montana—have similar funding programs.

State Research and Education Networks. States are also supporting their own research and education networks designed to boost academic research and promote digital access through collaboration in research and coordination that yields “reduced costs, shared expertise, shared services, advanced security, increased buying power, and economies of scale.”

  • In Michigan, the Merit Network provides broadband services to educational institutions spanning K-12 schools, universities, libraries, and government and health-care facilities across the state. The organization prides itself on developing customized solutions for the organizations, including the community anchor institutions, it serves.
  • The Corporation for Education Network Initiatives in California (CENIC) offers similar services to the state’s libraries and K-20 educational institutions over its 8,000 miles of optical fiber.
  • Connecticut’s State Library Board has contributed more than $3.6 million in grants to more than 90 libraries to enable them to connect to the high-speed fiber Connecticut Education Network (CEN).
  • Arkansas’s 2019 Broadband Plan focuses on the roles played by its research and education network, telemedicine network, and K-12 network.

Forty research and education networks have formed “The Quilt,” a national coalition whose purpose is to further scientific knowledge at academic institutions.

Jonathan Sallet is a Benton Senior Fellow. He works to promote broadband access and deployment, to advance competition, including through antitrust, and to preserve and protect internet openness. He is the former-Federal Communications Commission General Counsel (2013-2016), and Deputy Assistant Attorney General for Litigation, Antitrust Division, US Department of Justice (2016-2017). ​

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