E-Rate Program Overview E-Rate, created by the U.S. Telecommunications Act of 1996, helps ensure that K–12 schools and libraries, particularly those in low-income or rural areas, have affordable access to telecommunications and Internet services. The program provides annual subsidies or “discounts” of 20 percent to 90 percent on eligible services and technology equipment. For example, if a school district qualifies for a 90 percent discount, the E-Rate program pays 90 percent of the cost, while the district pays the remaining 10 percent. The discount rates are determined by the percentage of students eligible for free and reduced lunches through the National School Lunch Program. Public K–12 schools and districts and most nonprofit schools are eligible for E-Rate funding. Rural schools are typically eligible for higher discount rates than urban schools.

The FCC overhauled E-Rate in 2014 after President Obama called on the agency to modernize the program to meet broadband and Wi-Fi connectivity goals outlined in his new ConnectED Initiative. The initiative aims to provide 99 percent of America’s students with next-generation broadband (at speeds of at least 100 megabits per second, with a target of 1 gigabit per second) and to establish highspeed Wi-Fi networks in schools within the next five years. In response, the FCC issued two modernization orders in 2014, in July and December. Highlights include: Increased funding: E-Rate funding will increase from $2.4 billion to $3.9 billion annually. More Wi-Fi support: The increased funding includes a target of $1 billion per year for internal connections, such as local area networks (LANs) and Wi-Fi, for the next five years. Phasing out voice services: To focus on broadband and Wi-Fi, E-Rate will begin phasing out phone services, including cellphone plans, starting in the 2015 funding year. Increased broadband options: Of particular benefit to rural districts, schools can now purchase dark fiber as well as build their own high-speed broadband facilities if that’s the most cost-effective option.

Ensuring Affordable Broadband and Wi-Fi
The fundamental structure of E-Rate remains the same: Discounts are based on economic need, and the program allows individual schools or districts to choose the providers or technologies that best fit their needs as long as they’re the most cost-effective options.

Beginning in funding year 2016, schools and districts can also:
• Pay their portion of nonrecurring large construction costs over multiple years through an installment plan. Previous rules required schools to pay their portion within 90 days of service delivery.

• Use E-Rate funds to lease dark fiber, which can drive down broadband costs. Previously, schools could purchase only lit fiber services.

• Build their own high-speed broadband facilities if this is the most cost-effective solution.

• Receive additional E-Rate discounts if states help fund highspeed broadband construction. If a state agrees to provide financial support for last-mile broadband facilities, the E-Rate program will match the state’s contribution by providing up to 10 percent in additional Category One discounts.