A significant force driving the need for E-rate reform is the growing demand for Priority One Discounts. Over the past five years, the annual demand for Priority One E-rate discounts has increased at an average annual rate of 8%, from $2.05 billion in FY2009 to $2.76 billion in FY2013.
This change in the annual growth rate is accelerating. In FY2011, demand grew at a rate of 4% over the previous year. In FY2012 and FY2013, the demand for Priority One discounts grew at a rate of 9% and 13% over the previous year, respectively.
Forecasting Future Demand
As the FCC considers new changes to the E-rate program, it is important to understand what the demand for Priority One discounts may be in the future. In order to forecast Priority One demand, it is necessary to make assumptions as to the continued growth in demand for Priority One services.
As illustrated in the graph below, using a straight line model, the demand for Priority One discounts in FY2016 would reach $3.7 billion. Using an exponential model – one in which the growth in demand continues to accelerate, the demand for Priority One discounts in FY2016 would reach $4.9 billion.
Only time will tell which of these forecast models is the most accurate. The only sure bet is that the demand for Priority One discounts will continue to grow.