Dialing up Discounts: The New E-Rate Rings Up Discounted Internet and Telecommunications Services for Schools

by Mimi Mayer
Published in SEDL Letter Volume X, Number 2, December 1997, New Policies for Southwestern Schools

The cost of entering the world of educational telecommunications has just dropped for K-12 schools - courtesy of the Federal Communications Commission and the federal Telecommunications Act of 1996. Drawing upon special provisions of the act, on May 8 the FCC ruled that schools and libraries can get discounts of 20 to 90 percent off their monthly Internet, telephone, and other telecommunications bills and some of the other costs of bringing network connectivity to school classrooms.

For calendar year 1998, Washington has promised as much as $2.2 billion in funding for the annual discount program, dubbed "the E-rate" by federal officials. These dollars will be part of a newly established Universal Service Fund (USF) - and, if conditions warrant it, the USF may be replenished at equally high levels in the future. To ensure that the neediest schools and districts benefit from this largesse, the biggest discounts will go to schools and districts with the highest proportions of poor students and to schools in rural areas, which often pay higher fees than urban schools for Internet and other telecommunications services.

In highly rural states such as Arkansas, Louisiana, New Mexico, Oklahoma, and Texas, the E-rate should assist schools that have struggled to obtain and pay for telecommunications services and network connectivity.

Yet reaping the E-rate will not necessarily be easy. Money from the USF will not go directly to schools; it will go to telecommunications service providers or the producers of the hardware and equipment for network connections. The providers will pass along the savings in discounted bills to E-rate-qualified schools.

Schools must apply to the Schools and Libraries Corporation (SLC), a new agency, to receive the discounts. After January 1, 1998, the discounts will be awarded on a first-come, first-served basis. And there are limitations on which educational organizations can receive E-rate discounts, although all K-12 public schools and most private schools will qualify easily.

The application process is rigorous as well, particularly for newcomers to education networking and network telecommunications. Along with an official application form, schools must submit a technology inventory and a technology plan based on the inventory that specifies how telecommunications and Internet-based teaching will be integrated into the curriculum.

The plans should also include current and projected budgets for most of the costs associated with school telecommunications - from monthly telephone and network usage fees to teacher training in technology. One expert estimated that the E-rate will pay approximately 20 percent of the total bill for establishing and maintaining school network connectivity and telecommunications services. Discounts do not extend to such big ticket items as personal computers for teacher and student use, staff development programs, or content-based software. Savvy planners should build long-term budgets for costs not covered by the discounts; state grants may help. Grants are listed in the table, The E-Rate in the South and Southwest.

Nonetheless, the E-rate may ensure that more schools get Internet and telecommunications services, regardless of their location and budget size.

And the E-rate may bring more network-ready computers into classrooms, addressing a pandemic problem: Network connectivity is less likely to affect instruction if networked computers are available in the computer lab down the hall rather than in classrooms. A federal study found, in fall 1996, that nearly half of American schools had centralized their network computers and distance learning classrooms in a single lab or media center. Only one-quarter of American schools had Internet access in five or more classrooms. Thanks to the discounts, educators can receive financial help for developing a campus-wide network that may make technology-based learning routine in daily lessons.

The E-rate is complex. It is also a moving target, with the FCC, the Education Department, and other federal offices setting up the massive and brand-new program. States too must create administrative apparatus for their schools to reap the discounts and are working to implement the program with varying degrees of progress. Here is the most current information available by October 21, 1997, along with a chart detailing E-rate-related programs in Arkansas, Louisiana, New Mexico, Oklahoma, and Texas. Information was collected from websites and print publications of the FCC, the US Department of Education, and some state education agencies as well as interviews with state officials.

What Schools Are Eligible for Discounts?

All public K-12 school districts, public K-12 schools, and many K-12 private schools are eligible. Schools must, however, meet the statutory definition of an elementary or secondary school found in the Elementary and Secondary Education Act of 1965. Public libraries are also eligible for discounts paid for with the $2.2 billion USF. Schools that operate as a for-profit business, K-12 private schools with an endowment exceeding $50 million, and home schools are not eligible for discounts.

Consortia of schools, libraries, and other organizations may also be eligible for discounts, but a set of special rules make eligibility requirements tricky for consortia. Before pursuing this route, visit the FCC's website under "Frequently asked questions about schools and libraries." Many state education and education technology agencies also offer help.

What Level of Discount Can Your School Receive?

Discounts are available in tiers, based on the economic disadvantage of a school's students and its geographical location; see Table 1 below, Discounts for Schools and Libraries.


Table 1. Discounts for Schools and Libraries
% Eligible for
National School
Lunch Program
Discount %
for Urban Schools
Discount %
for Rural Schools
Less than 1 20 25
1-19 40 50
20-34 50 60
35-49 60 70
50-74 80 80
75-100 90 90


Economic disadvantage: This is determined by the percentage of students who qualify for the national free and reduced-price lunch program or a set of equivalents published under Title I of the Improving America's Schools Act of 1994. Schools and districts that do not participate in the national school lunch program can still qualify, but educators there must certify the percentage of students who would be eligible for the national lunch program to collect their discount.

Geographical location: Schools in rural areas with fewer than 50 percent of students on school lunch programs can receive greater discounts than comparable urban schools. For the E-rate, rurality is defined first by county: Any county classified as a Metropolitan Statistical Area (MSA) is considered urban, and schools there get the lesser, urban discounts. Schools in all other counties qualify for the rural discounts. The FCC will list every MSA county in the United States on its website before January 1. SEDLetter on the Web lists the urban MSA counties in Arkansas, Louisiana, New Mexico, Oklahoma, and Texas.

What Services and Equipment Are or Are Not Eligible for Discounts?

Discounts are offered on all commercially available telecommunications services, Internet access, and materials needed to make internal connections to networks and telecommunications services. Since the E-rate regulations are not yet etched in stone, the products and services listed here are likely, but not certain, candidates for discounts. When considering the discounts, remember a rule of thumb: Telecommunications and network development and connectivity costs must be directly linked to classroom learning and usage. Thus, the E-rate probably will deliver price breaks for:

  • Internet access fees, including access to an Internet gateway, information transmission into buildings, and e-mail
  • Telephone and wireless telecommunications service fees
  • Internal network connections necessary to carry information directly to classrooms; i.e., network file servers and server software; routers; hubs; fiber optic, coaxial, or copper cable; wireless local area networks; plus the installation and basic maintenance costs associated with this equipment

The FCC has stipulated that discounts are not available for personal computers for teachers and students, content software, fax machines, voice mail, modems, teacher training, electrical system upgrades, and other resources not directly applicable to student use of telecommunications and Internet services in individual classrooms.

How Does My School Apply?

Gingerly, until the program is finalized by the FCC. If the E-rate program is a moving target, the application process is its swiftest moving portion. Keep in touch with the evolving application process at the FCC LearnNet website, http://www.ed.gov/learnet/ (no longer active 9/9/2003) and the US Department of Eductions Technology website http://www.ed.gov/about/offices/list/os/technology/index.html under "Universal Access (E-Rate) Information." At the USDE site you'll the final versions of the two Schools and Libraries Universal Service Program forms - Form 470, "Services Requested and Certification Form," and Form 471, "Services Ordered, Certification, and Termination Form." The USDE site also offers information that may help you through the application process.

The application process involves three steps.

1) Complete a technology needs inventory and write a technology plan based on that inventory. Documenting services and equipment currently on-site or budgeted-for, the inventory should include:

  • Interstate and instate telephone services and equipment, including lines or trunks, and leasing agreements
  • Computer services and equipment
  • Network services and equipment connecting computers within school buildings or within school districts (i.e., a LAN or local area network)
  • Computers equipped with modems, the speed of those modems, and the bandwidth of dedicated connections
  • Communications software for network connectivity
  • Planned NetDays or similar voluntary network installation programs
  • Experience and training of staff who will manage or maintain the discounted telecommunications and network services
  • Plans for additional staff training, including all teachers and aides who will use the equipment
  • Maintenance contracts
  • Descriptions of the capacity of school electrical systems

The technology inventory should give schools a jump-start in writing a technology plan. This plan lays out how schools will use the inventoried services and equipment in the near-term and the future; by October 15, the FCC had not defined how far into the future the technology plan should extend. The plan should also specify how technology will be integrated into the curriculum.

All plans must be "independently approved" by the state department of education or the state educational technology department, states the original FCC ruling (¶574); Table 2, The E-Rate in the South and Southwest, names these agencies for Arkansas, Louisiana, New Mexico, Oklahoma, and Texas. If the state agency cannot review plans within a "reasonable time," the School and Library Corporation (SLC) will do it. Plans already approved for other purposes - e.g., for federal Technology Challenge Grants and Goals 2000 Grants - needn't undergo the approval process again.

To ensure discount eligibility during the 1998 calendar year, the FCC recommends that, right now, schools write their technology inventories and technology plans, then send them to state approval groups as soon as possible.

2) Describe the services you want to acquire in sufficient detail to allow potential service providers to formulate bids. Bids will be posted on a website managed by the SLC. "Complete information" includes the ZIP code(s) for schools requesting services, the number of students and the number of buildings involved, the percentage of students eligible for the school lunch program, and the type of services sought. If state or local procurement practices require it, the description may be a formal request for proposal, although the SLC will also accept a less formal description. In either case, thoroughness counts.

3) Certify statements under oath. The individual who will order services for the school must certify under oath that:

  • The school meets E-rate eligibility requirements.
  • Services and equipment will be used solely for educational purposes.
  • Services received at discounts will not be resold or transferred to another party.
  • The school has followed state and local procurement procedures.
  • The technology plan has been approved by an outside party, such as the state department of education or the state educational technology department.
  • All the necessary funding in the current fiscal year has been budgeted and approved to pay for nondiscounted portions of the network and telecommunications services along with any additional equipment, services, and staff training needed to use the discounted services effectively.

What Will Happen During Application, Bidding, and Contract Acceptance?

Once application materials are completed and certified, schools submit them to the SLC for review and approval.

After approval, the SLC will post a school's request for services - in the order in which it was received - on its website for open bidding by commercial vendors and providers. Vendors will have a minimum of four weeks to provide bids. Schools don't have to accept services from a single provider; nor are they forced to accept the lowest bid. Instead, they may review all bids and select the "most cost-effective provider" of telecommunications services, Internet services, and internal connections, says the FCC. Once the school and the provider(s) have hammered out a contract, the school's representative notifies the SLC of the agreement. After service begins, the school again contacts the SLC so it can disburse funds to providers. Schools should automatically receive discounts from service providers, and it is up to providers to collect the difference between standard and discounted pricing from the SLC.

How Are SEDL States Handling the E-Rate Discounts?

State government has a role to play in the E-rate program. First, the public utility commission or its equivalent was to approve instate discounts on telecommunications and network services that match or surpass the federal discounts. Arkansas, Louisiana, New Mexico, and Texas adopted instate discounts equal to those posted by the FCC. Larry A. Schroeder of the Oklahoma Corporation Commission's Public Utility Division said his state went beyond these discounts to create "special universal services" for schools. These include no-toll telephone services for school districts that stretch across two local-calling areas and five incoming access lines at no charge.

As for other E-rate-based programs, the states are taking different tacks. Consider New Mexico. By October, all 89 of New Mexico's districts had filed technology plans with the state's Educational Technology and Data Management department, according to Kurt Steinhaus and Ruth Pino, who oversee the unit - and these plans will go to the SLC along with the districts' other E-rate application materials. In September New Mexico ETDM conducted E-rate training sessions that attracted many of the state's superintendents, principals, and school technology coordinators. In October, state officials in Arkansas, Louisiana, Oklahoma, and Texas were gearing up to offer E-rate assistance to schools, including technology plan approval and application help.

All five states offer schools competitive grants that partially cover technology implementation costs not met by the E-rate. Table 2, The E-Rate in the South and Southwest, summarizes state activities and E-rate-related programs.

Next Article: Urban Counties in the South and Southwest