The federal E-rate program is an essential resource for schools and libraries, especially for infrastructure funding.
In 2014, the Federal Communications Commission (FCC) released its Seventh Report and Order modernizing many program rules. Set up as a five-year pilot, a Category Two “budget” system was created to enable schools and libraries to reach connectivity goals by more equitably distributing E-rate funding.
The pilot was a huge success, with $6.0 billion being invested in Wi-Fi and other network infrastructure since Funding Year 2015. But, key provisions of the 2014 E-rate order were set to expire in 2020, leaving applicants anxiously awaiting a permanent Category 2 approach. 
After requesting stakeholder feedback in July 2019, the FCC released the official Report and Order covering final Category 2 rules in December – and making the Category 2 system permanent.
What E-rate changes do applicants need to know for FY2020?
Category 2 budgets will be calculated using the same per-site methodology used in FY2015-2019.
  • The process of calculating Category 2 budgets will remain the same as past funding years, using the per-site methodology used in FY2015-2019. Unused Category 2 site budgets will expire at the end of FY2020 with no carryover.
FY2020 Category 2 budgets will receive a 20% increase
  • The new Category 2 rules provide a one-time dose of extra funding in FY2020 – this is a unique opportunity for applicants. After you understand your library or district’s needs for 2021, you can estimate the E-rate support available in 2020 to begin contributing to these long-term goals. 
Category 2 Budget Multipliers for FY2020 are as follows:
  • Schools: $195.63 per student
  • Libraries with IMLS Locale Codes 11, 12, 21: $6.52 per square foot
  • Libraries with all other IMLS Locale Codes: $3.00 per square foot
  • Entities at the Funding Floor: $11,998.43 per site
You can estimate the amount financial support that is available using the Funds For Learning Category 2 Budget Calculator.
The FY2020 E-rate Eligible Services List (ESL) has been released.
  • On December 9, 2019, the FCC released the E-rate program’s Eligible Services List (ESL) for FY2020. Noting “limited changes” from the FY2019 version of the ESL, the Commission declined to include new services or functionality as eligible for either Category One or Category 2 services.  
As per the Category Two Report and Order, the eligibility of Category Two caching services, Basic Maintenance of Internal Connections, and Managed Internal Broadband Services has been retained. 
Click here for the FY2020 E-rate Eligible Services List.
In the end, the key to planning a successful Category 2 E-rate funding application for 2020 is straightforward:
  1. Forecast each site’s I.T. infrastructure needs from mid-2020 through late 2021
  2. Review the E-rate eligible services list
  3. Estimate the available financial support for each site
Armed with this information, you’ll be equipped to start the competitive bidding process and procure the Wi-Fi and other network infrastructure components your sites need.
What’s coming in FY2021?
Applicant budgets will be reset.
  • What? Beginning in FY2021 all applicant budgets will be reset to the full amount eligible under the new rules. As part of this modification, the FCC will adopt district-wide and library system-wide budget calculations.
  • Why? The FCC chose to reset budgets to provide applicants with the opportunity to deploy internal connections and make easier to manage and track their Category 2 budgets in the new funding cycle.
  • FFL’s take: E-rate applicants understand the importance of planning. In our 2019 E-rate Trends Report, 57 percent of applicants indicated they’d need to upgrade Wi-Fi in one to three years. With the reset and reform of budgets, this is likely to be less of a burden because applicants can now forecast the budget they’ll receive years in advance. 
The program will adopt ‘fixed’ five-year budget cycles
  • What? The new FCC rules adopt fixed five-year budget cycles, with the first cycle running from FY2021 through FY2025. Applicants can submit applications in any or all Funding Years during this five-year cycle. A new budget cycle will begin in subsequent five-year periods (e.g. FY2026) with no rollover of funds from cycle-to-cycle.
  • Why? The new budget cycles are meant to ease the administration of budgets and streamline the application process.
  • FFL’s take: In the 2019 Category 2 Notice, the FCC sought comment on using rolling budgets or setting fixed five-year cycles. Several commenters, including the State E-rate Coordinators’ Alliance and Schools, Health & Libraries Broadband Coalition, supported the fixed-cycle option, noting that they present the clearest and cleanest approach. Fixed cycles also offer natural beginning and end points for budgets, making it easier to update budgets in the future. 
Category 2 budgets will be calculated on a school district or library system basis.
  • What? Starting in FY2021, the E-rate program will adopt district-wide and library system-wide Category 2 budgets. School districts and library systems will now have a single budget to administer, and the per-site funding “floor” will increase from $9,200 to $25,000. New budget multiplier factors are $167/student for schools, and $4.50/square foot for libraries. 
  • Why? Switching to system-wide budget calculations was a change that nearly all commenters supported. With this change, districts and library systems will have more flexibility when allocating Category 2 funds. 
According to the FCC, “this will simplify some of the more complicated aspects of administering the budgets and applying for funding [such as dividing the costs of shared services among multiple entities, estimating student counts at new schools, and counting part-time students], without eliminating protections against waste, fraud, and abuse, which continue to apply with respect to each individual school and library included in the school district-wide and library system-wide budgets.”
  • FFL’s take: This is a huge win for E-rate applicants. Changing the Category 2 funding cap to a per-district or library system basis is a consistent request we’ve seen in our Annual E-rate Trends report and heard in our E-rate Coordinator Spotlight series. This relieves much of the planning stress that inevitably comes with budgeting, and gives a new way to forecast E-rate needs. 
The budget ‘floor’ for smaller sites will be increased to $25,000.
  • What? The pre-discount site minimum will increase from $9,200 per site to $25,000 per site. 
  • Why? To ensure that small schools and libraries have sufficient funding to deploy their internal connections, the FCC rules include an increased the funding floor, switching to a pre-discount level of $25,000 over the five-year funding cycle beginning in funding year 2021. 
  • FFL’s take: In the 2019 Category 2 Notice, the FCC sought comment on whether the funding floor should be increased from $9,200 to $25,000, a decision that commenters strongly supported. Historically, applicants at smaller sites were deterred from applying for Category 2 funds because the time investment simply wasn’t worth the return. By increasing the floor, every applicant has access to the value of Category 2 funds.
Equipment transfer rules will be relaxed.
  • What? The equipment transfer rule will be eased to lessen the paperwork burden on school districts and library systems. With the new district-wide and library system-wide budget approach, Category 2 purchases will fall under the same budget, so there’s no longer an incentive to purchase a piece of equipment for one school, then move it to another.
  • Why? FCC rules originally included a prohibition on equipment transfers to prevent applicants from circumventing the then-existent per-site Category 2 budget rules. With the new system-wide budget approach starting in FY2020, the rule will not be necessary.
  • FFL’s take: Elimination of the transfer rule for equipment purchased in FY2021 and onward provides applicants with significantly more flexibility than in years past.  Applicants will now be able to deploy the right infrastructure to the right users at the right time, without the burden of complicated asset location tracking restraints.
These updates mark an exciting time for E-rate applicants. To stay on top of E-rate changes, register for our webinar series. Have an immediate question? Contact us today.