E-Rate is the commonly used name for the Schools and Libraries Program of the Universal Service Fund
Universal Service Fund
The Universal Service Fund was created by the United States Federal Communications Commission in 1997 to meet Congressional universal service goals as mandated by the Telecommunications Act of 1996...

, which is administered by the Universal Service Administrative Company
Universal Service Administrative Company
The Universal Service Administrative Company is an independent American nonprofit corporation designated as the administrator of the federal Universal Service Fund by the Federal Communications Commission. USAC is a subsidiary of the National Exchange Carrier Association...

  (USAC) under the direction of the Federal Communications Commission
Federal Communications Commission
The Federal Communications Commission is an independent agency of the United States government, created, Congressional statute , and with the majority of its commissioners appointed by the current President. The FCC works towards six goals in the areas of broadband, competition, the spectrum, the...



The program provides discounts to assist most schools and libraries in the United States (and U.S. territories) to obtain affordable telecommunications and Internet access
Internet access
Many technologies and service plans for Internet access allow customers to connect to the Internet.Consumer use first became popular through dial-up connections in the 20th century....

. It is one of four support programs funded through a Universal Service
Universal service
Universal service is an economic, legal and business term used mostly in regulated industries, referring to the practice of providing a baseline level of services to every resident of a country...

 fee charged to companies that provide interstate and/or international telecommunications services.

The Schools and Libraries Program supports connectivity - the conduit or pipeline for communications using telecommunications services and/or the Internet. Funding is requested under four categories of service: telecommunications services, Internet access, internal connections, and basic maintenance of internal connections. Discounts for support depend on the level of poverty and the urban/rural status of the population served and range from 20% to 90% of the costs of eligible services. Eligible schools, school district
School district
School districts are a form of special-purpose district which serves to operate the local public primary and secondary schools.-United States:...

s and libraries may apply individually or as part of a consortium.

Applicants must provide additional resources including end-user
Economics and commerce define an end user as the person who uses a product. The end user or consumer may differ from the person who purchases the product...

 equipment (e.g., computers, telephones, etc.), software, professional development
Professional development
Professional development refers to skills and knowledge attained for both personal development and career advancement. Professional development encompasses all types of facilitated learning opportunities, ranging from college degrees to formal coursework, conferences and informal learning...

, and the other elements that are necessary to utilize the connectivity funded by the Schools and Libraries Program.


The Schools and Libraries portion of the Universal Service Fund, more widely known as E-Rate, was authorized as part of the Telecommunications Act of 1996
Telecommunications Act of 1996
The Telecommunications Act of 1996 was the first major overhaul of United States telecommunications law in nearly 62 years, amending the Communications Act of 1934. This Act, signed by President Bill Clinton, was a major stepping stone towards the future of telecommunications, since this was the...

. Section 254 codified provisions for universal service, a principle that broadly means everyone should have access to advanced telecommunications services at reasonable rates regardless of their location. Two measures were included to advance this goal specifically for libraries and schools. Telecommunications providers were ordered to supply their services to schools and libraries at discounted rates determined by the FCC (S.652, Section 254(h) (1)(B)). More generally, the FCC was directed to establish rules “to enhance... access to advanced telecommunications and information services for all public and nonprofit elementary and secondary school classrooms, health care
Health care
Health care is the diagnosis, treatment, and prevention of disease, illness, injury, and other physical and mental impairments in humans. Health care is delivered by practitioners in medicine, chiropractic, dentistry, nursing, pharmacy, allied health, and other care providers...

 providers, and libraries” (Section 254(h) (2)(A)). The FCC was given the authority to establish and periodically evaluate what services qualified for support under both measures according to four broad criteria (Section 254(c) (1)). Funding was to be provided by contributions from telecommunications providers through an unspecified but “equitable and nondiscriminatory” mechanism (Section 254(b) (4)).


The FCC adopted Order 97-157 in response to Section 254 on May 7, 1997. The FCC determined that “telecommunications services, Internet access, and internal connections,” including “installation and maintenance,” were eligible for discounted rates (FCC 1997a, 255). Internal connections were defined as “essential element[s] in the transmission of information within the school or library” (459). The level of discount that a school or library received would vary from 20% to 90% depending on the cost of services and level of poverty as measured by the percentage of students eligible for the national school lunch program
National School Lunch Act
The Richard B. Russell National School Lunch Act is a United States federal law signed by President Harry S. Truman in 1946. The act created the National School Lunch Program , a program to provide low-cost or free school lunch meals to qualified students through subsidies to schools...

 (498). The total amount of money to be disbursed was capped at 2.25 billion (425).

The FCC designed the application process to promote cost effective
Cost-effectiveness analysis is a form of economic analysis that compares the relative costs and outcomes of two or more courses of action. Cost-effectiveness analysis is distinct from cost-benefit analysis, which assigns a monetary value to the measure of effect...

 and accountable solutions. As a part of their applications, schools and libraries were required to conduct an assessment of their current technology resources and explain how they utilize them for their educational mission. This assessment had to be certified by an outside organization, preferably the state government. Schools and libraries were required to select vendors through a competitive bidding process publicized through a national website. Record-keeping requirements were instituted to facilitate audits. (572-581).

The FCC decided to fund E-Rate through the same pool of money collected for other Universal Service Fund, or USF, programs (584). The new language in the Telecommunications Act of 1996 expanded the pool of companies required to contribute. The expanded pool included all companies that provided interstate telecommunications service
Telecommunications service
In telecommunication, the term telecommunications service has the following meanings:1. Any service provided by a telecommunication provider....

 to the public for a fee (777). This raised the number of companies contributing to the USF from 65 to around 3500 (CBO, 1998, 19). A company's contribution to the USF is based on its interstate and intrastate revenues from sales to end users (FCC, 1997a, 843). Companies submit revenue projections, from which the contribution factor is determined and then assessed. This process takes place on a quarterly basis (How the USF Works). In order to preserve low-cost local phone service, companies are only permitted to increase interstate revenues to recoup their USF contribution costs (FCC, 1997a, 843).

The National Exchange Carrier Association
National Exchange Carrier Association
The National Exchange Carrier Association is a not-for-profit association created in 1984 by telecommunications companies to administer the fees that long distance companies pay to access local telephone networks...

 managed the existing universal service fund, and in their initial authorizing order the FCC directed the NECA to temporarily administer E-Rate as well (42). When the NECA was unable to agree on how to restructure its Board of Directors
Board of directors
A board of directors is a body of elected or appointed members who jointly oversee the activities of a company or organization. Other names include board of governors, board of managers, board of regents, board of trustees, and board of visitors...

 to reduce the influence of incumbent local exchange carriers, it instead proposed creation of a subsidiary, the Universal Service Administrative Company, with a board composed of representatives from telecommunications providers and the USF recipient groups (FCC, 1997b, 33). In Order 97-253 the FCC agreed to this proposal (12). The FCC also directed NECA to create to unaffiliated corporations to manage the schools and libraries and rural health care programs (26). However, Senator Ted Stevens
Ted Stevens
Theodore Fulton "Ted" Stevens, Sr. was a United States Senator from Alaska, serving from December 24, 1968, until January 3, 2009, and thus the longest-serving Republican senator in history...

 and the House Committee
United States Congressional committee
A congressional committee is a legislative sub-organization in the United States Congress that handles a specific duty . Committee membership enables members to develop specialized knowledge of the matters under their jurisdiction...

 on Commerce soon inquired whether this violated the Government Corporation Control Act. The GAO concluded that it did, and an amendment was added to s.1768 that required the FCC to restructure USF administration (GAO, 1998a, 5). In response, the two new corporations were terminated and their responsibilities shifted to two new divisions within USAC (FCC, 1998, 2). ABCD


In addition to the incorporation scandal, E-Rate faced legal challenges from eleven states and six telecommunications companies. These were consolidated in Texas Office of Public Utility Counsel, et al. v. FCC before the United States Court of Appeals
United States court of appeals
The United States courts of appeals are the intermediate appellate courts of the United States federal court system...

 for the 5th District. The chief state complaint was unrelated to E-Rate, but a company complaint about the method of contribution was relevant (GAO, 1998B). Since the USF fee collection is mandated by the federal government, the CBO and OMB consider the fees collected to be federal revenues and the money disbursed for discounts to be federal outlays (CBO, viii). However, only the United States House of Representatives
United States House of Representatives
The United States House of Representatives is one of the two Houses of the United States Congress, the bicameral legislature which also includes the Senate.The composition and powers of the House are established in Article One of the Constitution...

 is constitutionally permitted to introduce revenue-generating measures. Also, the power to establish user fees
User fees
People pay user fees for the use of many public services and facilities. At the federal level in the US, there is a charge for walking to the top of the Statue of Liberty, to drive into many National parks, and to use particular services of the Library of Congress.States may charge tolls for...

 may be delegated to executive agencies
Executive agency
An executive agency, also known as a next-step agency, is a part of a government department that is treated as managerially and budgetarily separate in order to carry out some part of the executive functions of the United Kingdom government, Scottish Government, Welsh Assembly or Northern Ireland...

, but the power to tax may not (Joint Committee
Joint committee
A Joint Committee is a term in politics that is used to refer to a committee made up of members of both chambers of a bicameral legislature. In other contexts, it refers to a committee with members from more than one organization.-Republic of Ireland:...

, 1998). The court found that the FCC's collection of USF fees did not violate the constitution (Opinion of the U.S. Court of Appeals, 1999, (III) (5)(a)(i)(a)).

Some members of Congress objected to the level and method of funding provided by the FCC to E-Rate. They viewed the inclusion of internal connections and $2.25 billion budget as excessive and a drain on resources needed to achieve other aspects of universal service. Two such members, Representative Tauzin and Senator Burns, proposed unsuccessful legislation in the 106th Congress
106th United States Congress
The One Hundred Sixth United States Congress was a meeting of the legislative branch of the United States federal government, composed of the United States Senate and the United States House of Representatives. It met in Washington, DC from January 3, 1999 to January 3, 2001, during the last two...

 to end E-Rate and replace it by a block grant
Block grant
In a fiscal federal form of government, a block grant is a large sum of money granted by the national government to a regional government with only general provisions as to the way it is to be spent...

 program administered by the Commerce Department. Several other pieces of legislation have been introduced that keep E-Rate but change the funding mechanism to avoid a direct impact on local phone service (CRS, 2003, 5-7).

In 2002, a report on USF from the FCC's Office of Inspector General
Inspector General
An Inspector General is an investigative official in a civil or military organization. The plural of the term is Inspectors General.-Bangladesh:...

 raised considerable alarm. With regards to E-Rate, the OIG identified a “lack of resources for effective oversight,” “inadequate competitive bidding requirements,” and “no suspension or disbarment process” for schools, libraries, or companies with a history of fraud. Random audits conducted by the OIG led to a number of criminal investigations (FCC, 2002, 3-6). In response, Congress requested a GAO report on the health of E-Rate and planned hearings on the matter.

The Government Accountability Office
Government Accountability Office
The Government Accountability Office is the audit, evaluation, and investigative arm of the United States Congress. It is located in the legislative branch of the United States government.-History:...

 (GAO) found serious fault with the unusual organizational structure
Organizational structure
An organizational structure consists of activities such as task allocation, coordination and supervision, which are directed towards the achievement of organizational aims. It can also be considered as the viewing glass or perspective through which individuals see their organization and its...

 of E-Rate. USAC was not operating under federal fiscal accountability standards. Also, the GAO decried the lack of performance measures for evaluating the impact of E-Rate funds (GAO, 2005, 4-5). The House Committee on Energy and Commerce's Subcommittee on Oversights and Investigations held four hearings into misuse of E-Rate funds. The subcommittee found a multitude of irregularities: purchases were being made with fraudulent documentation and without competitive bidding; inadequate technology plans were accepted and led to unused, wasted resources; and no protections were in place to prevent gold plating
Gold plating
Gold plating is a method of depositing a thin layer of gold onto the surface of another metal, most often copper or silver , by chemical or electrochemical plating...

 (“procurement of technology goods and services
Goods and services
In economics, economic output is divided into physical goods and intangible services. Consumption of goods and services is assumed to produce utility. It is often used when referring to a Goods and Services Tax....

far beyond reasonable school district needs and resources”) and many other forms of abuse (Committee on Energy and Commerce, 2005, 2-3).


It is difficult to measure the effectiveness of a program that has broad goals and little oversight. Yearly requests for E-Rate funding almost triple the FCC's $2.25 billion limit (CRS, 2003, 7). At the beginning of 2005, over 100,000 schools had participated in the program (GAO, 2005, 58). In 2003, nearly half of the funding went to schools where more than half of the students receive reduced price lunches (CRS, 2004, 5). Department of Education Surveys show that between 1994 and 1999, Internet access in public schools rose from 35% to 95%, and access in classrooms rose from 3% to 63% (CRS, 2001, 5). This period coincides with growth in Internet access across society and only briefly coincides with the existence of E-Rate. It is thus impossible to causally link the two. However, other evidence does suggest a correlation. A 2006 Case study performed by the Benton Foundation found that E-Rate funding had a direct impact on classroom Internet connectivity in four cities. An evaluation of E-Rate in California by Goolsbee and Guryan showed a 68% increase in classroom connectivity per teacher but could not identify any impact on student achievement, however, a study concluded in 2005 by a University of Texas student under the supervision of Economics Professor Mike Ward, using regression analysis, showed the E-Rate program in Texas school districts to have positive effect on factors like test scores, graduation rates, and college admission rates.

External links

The source of this article is wikipedia, the free encyclopedia.  The text of this article is licensed under the GFDL.