With the 7th Report and Order, the FCC fundamentally changed much of how the E-rate program operates, bringing dated aspects of the program in line with educational technology needs for modern schools and libraries.

One of the more sweeping changes to the program is the establishment of a budget system for Category Two funding dedicated to network equipment, maintenance and services. As Funds For Learning has proposed before, a budget system is necessary to ensure equitable funding for all applicants and curb high per-student funding applications.

The FCC has set aside $2 billion of E-rate funds for Category Two purchases in Funding Years 2015 and 2016, and has also set “funding targets” of $1 billion per year after that. These funds will go a long way to provide E-rate discounts on network infrastructure, breaking the recent cycle where little to no funding has been available for the purchase or maintenance of equipment since Funding Year 2010.

But, how far will these funds stretch for E-rate applicants? Applicants with higher discount rates will continue to be funded first, and there could still be a shortage of funding for E-rate applicants—unless the program fund is permanently increased.

The chart below shows the cumulative total of school applicant budgets, based on the enrollment figures from Funding Year 2014, and the $150 per-student pre-discount budget established by the FCC.
Category 2 Budget Cap - School Applicants

Based on the calculations from our analysis, the $2 billion that the FCC has reserved for FY 2015 and 2016 will have almost run out after funding school applicants whose student population is 67.6% eligible for the National School Lunch Program (NSLP) – assuming that school applicants will fully utilize their funding budgets. The FCC will need twice as much money to provide funding for school applicants that have 44% of their student population who qualify for the NSLP, and over another billion dollars to fund the rest of the nation’s schools. Notably, this chart does not include the Category Two funding budget for library applicants, which is calculated on library facility square footage.