The Category Two budget system was designed as a five-year program, offering applicants two important planning tools: funding and predictability. As highlighted in the FCC staff report, use of the Category Two (C2) budget system since 2015 has been a big improvement over the previous system. Excluding non-instructional facilities, Funds For Learning estimates that there currently are 115,243 school and library sites participating in the E-rate program. Overall, 91,863 school and library sites have received at least some support for on-campus networking. That is 80% of sites, or about 20% of sites each year.

There are two types of sites that fall well below this average: libraries and very small schools. 48% of library sites and 59% of small school sites have utilized C2 funds. For libraries, the relatively low utilization of C2 funds seems relatively consistent across all sizes of library, and the numbers do not vary much by location type. Small or large, urban or rural, more than half of libraries have not used C2 funds.
 
For school sites, the story is different. Overall, only 17% of school sites have not utilized C2 funds. However, one group stands out from the crowd: schools with enrollment of 99 or fewer students. For this group of sites, the zero-utilization rate is 41%. In other words, very small schools are almost two-and-a-half times more likely not to have used C2 funding.
What Can Be Done?
There are many steps the FCC could take to improve the Category Two regulations. To start the conversation, Funds For Learning offers a simple “0-1-2-3” fix to the Category Two budget system:
 

Zero

No I.T. infrastructure should be ineligible for support. Allow applicants to submit requests for all networking equipment, including I.P. telephony and network security and management tools. C2 budget caps have a proven track record of guarding the available funds. Applicants should have the ability to put their C2 infrastructure funds to use where they are needed the most.

One

Adopt a single budget for each applicant. Rather than having site-specific budgets, there should be one overall C2 budget for each school district or library system. This would allow an applicant to shift funding to the sites that need it the most, increase overall C2 utilization, and significantly reduce the administrative burden of estimating and tracking 115,243 individual budgets.

Two

Increase the student budget factor by a factor of two. 82% of school survey respondents believe that the current budget cap is set too low to meet their needs.

Three

Increase the budget floors by a factor of three. As described in the FCC Staff C2 report, the painfully low budget floors are a significant impediment to utilization of C2 funding. Bring the minimum C2 budgets up to a level that more accurately reflects the realities that small schools and libraries face.


For additional reading about C2 utilization, see the Funds For Learning FCC Ex Parte filing. Below are detailed statistics related to school and library site C2 budget utilization.
 
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