Since 1998, the E-Rate program (more formally known as the schools and libraries universal support mechanism) has provided support for connectivity to and within schools and libraries. In 2014, the Federal Communications Commission established a new budget approach for internal connections, primarily used for Wi-Fi, a transformative educational tool that has allowed schools and libraries to transition from computer labs to one-to-one digital learning, and thereby help close the digital divide.  Specifically, the FCC adopted rules establishing five-year budgets for schools and libraries that provide a set amount of funding to support internal connections.  The FCC also directed the Wireline Competition Bureau to monitor this new five-year budget approach and report on its sufficiency and effectiveness.

In this Report, the Bureau analyzes available data on the five-year budgets for internal connections, also referred to as “category two budgets.”  Based on the review of the data, the Bureau identifies numerous ways in which the category two budget approach has resulted in a broader distribution of funding that is more equitable and more predictable for schools and libraries.  Accordingly, the Bureau recommends that the FCC retain the category two budget approach and avoid a return to the prior so-called “two-in-five rules” approach.  This recommendation is based on the data showing clear improvements in the way in which funding for internal connections has been administered since Funding Year (FY) 2015.  In addition, the Bureau recommends that the FCC consider modifications to the existing category two budget approach to enhance the ability of the E-Rate program to provide funding to schools and libraries to support high-speed connectivity.  For example, the Bureau recommends raising the funding floor if the FCC finds that insufficient funding is deterring participation by schools and libraries at the funding floor.