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SLD Projects E-rate Demand of $2.435 Billion

Despite the delays and pain associated with the first E-rate funding year, it appeared that schools and libraries were nevertheless coming back for Year 2, posting another 32,000 Form 471 applications during the initial filing window and requesting a projected $2.435 billion. The number of applications was approximately 2,000 more than last year, but it could not yet be determined whether that number represented more actual applicants.

The governing committee of the Schools and Libraries Division voted April 19 to tell the Federal Communications Commission that the projected demand for the program had reached that level, more than $200 million greater than the FCC's statutory cap on the program. The commission must soon determine how much E-rate support to make available in the funding year that starts on July 1so that the SLD can begin to process funding commitment letters for the new year and the commission can determine how much telecommunications carriers have to contribute to the Universal Service Fund.

The SLD projected that $931 million, or 39 percent of the total requested, was for telecommunications services and Internet access, services that are funded for all eligible applicants. Another $1.5 billion, or 61 percent of the total, was requested for internal connections, which are supported with whatever funds remain, with the neediest applicants receiving top priority.

Officially, the E-rate program is still capped at $2.25 billion. Last year, the FCC provided $1.925 billion to cover an 18-month funding year. If the commission decides to maintain the schools and libraries program at its current funding level, only $1.3 billion would be available for the next funding year.

The SLD said it could project the numbers with 95 percent accuracy. It said the overall number could have a margin of error of about 4.5 percentage points; the margin of error on the figures cited for the categories of services could be as many as 6 percentage points. SLD staff said they had reviewed about 15,000 applications in producing their total, including most of the large requests from big urban school districts and large consortia.

Requests for the three kinds of E-rate eligible services–telecommunications services, Internet access and internal connections–were proportionately about the same in the second filing window as they were in the first. But unless the FCC decides to increase the available funding, telecommunications services and Internet access will apparently grab a larger piece of the total pie in the coming funding year.

So far, the SLD has committed a total of $762 million for those services for 1998–a figure that includes funds to cover an additional six months of support for some applicants. For the 1999-2000 year, it projected that $931 million had been requested for those services for a time period of only 12 months.

Several factors may have contributed to the increased requests for these kinds of services. The program's visibility may simply have grown from Year 1 to Year 2. Because of the change in the priority rules in mid-1998, applicants with lower discount rates may have focused their attention on those services that they knew would be supported, namely telecommunications services and Internet access, rather than internal connections, which were supported only for applicants with discount rates of 70 percent or higher. Further, as applicants started building and expanding their networks, it is likely that their costs for telecommunications services would grow along with their needs for connectivity. In addition, some applicants may have only recently realized that they could obtain support for Plain Old Telephone Service, including long distance.

If the projections hold up, and the FCC chooses to maintain the program's current level of support, it may become tougher to qualify for support for internal connections in the coming year. In the 1998 funding year, the SLD approved $346 million worth of commitments for internal connections for applicants with discount rates of 90 percent or above. At the current $1.3 million funding level, only $369 million would be left to spend on internal connections, if the numbers for telecommunications services and Internet access are accurately projected.

In a November, 1998 budget estimate, the SLD had projected that it would handle 40,000 Form 470s and 50,000 Form 471s during the 1999-2000 filing window. Asked to comment on the difference between those numbers and the 32,000 Form 471s that the SLD actually received, spokeswoman Jodie Pozo-Olano replied: "We're pleased that the demand is higher than last year." She said it was hard to predict how many applications would be filed from year to year because of the variety of factors that could come into play.

The SLD reported that 9,000 Form 471 applications had been filed online, or about 28 percent of the total, compared with 84 percent of the Form 470s. In January, then-SLD general counsel Debra Kriete had said that the division's budget projections assumed that 60 percent of the applications would be filed online. That the online Form 471 application could be used only by those with particular Web browsing software, and could not be accessed by those using Macintosh computers may have been one factor that limited the number of online applications that could be filed.

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