Fast Facts About New E-Rate Category 2 Rules

Bob Nilsson Director, Vertical Solutions Marketing Published 2 Oct 2019

A new FCC announcement about changes to the E-Rate Category 2 is on the horizon, and those who follow education policy are abuzz with speculation. While no one can predict with 100% accuracy how this will play out, we’ve dusted off our crystal ball (i.e., consulted with a handful of experts). Here are some thoughts on what to expect.

Category 2 services are those “needed to enable high-speed broadband connectivity and broadband internal connections components.” Prior to 2015, Category 2 funding had no guaranteed availability. Since then, however, every school has been eligible to receive some amount of Category 2 funding.

Since 2014, when the FCC announced the new rules for Category 2 that would cover the five-year period of 2015-2019, the E-Rate program has provided more than $4.35 billion for Category 2 school and library projects. Before 2014, Category 2 funding was provided to only 14% of school districts nationwide; since 2015, that number has leaped significantly, to 83 percent. Many agree that the rules implemented in 2014 have had a positive impact and have resulted in more equitable and sustained funding to a greater number of schools.  

If the FCC does not issue a successor set of rules, the rules revert back to the “two-in-five” year regulation. Under this system, applicants could only apply for Category 2 funding (previously known as Priority 2 funding) two out of every five years. Many considered this process cumbersome and confusing. The FCC’s staff recommends retaining the Category 2 budget approach instead of reverting to the “two-in-five” rule.

Now that we are in Year 5 of the five-year budget cycle, the FCC needs to come up with a plan for the next five years. In July, the FCC released its long-awaited Notice of Proposed Rulemaking (NPRM) for Category 2 (starting in 2020-2021). It retains the Category 2 budget approach and proposed recommendations for how it might be improved. At that time, the FCC invited comments for improvements and changes to the NPRM, and comments poured in until the window for responses closed this fall. The FCC issued a similar public notice seeking comment on the new proposed Eligible Services List (ESL), to which some also replied.

Many organizations have weighed in with suggestions for improving Category 2 funding. Here are links to some of these recommendations:

Not too surprisingly, the above groups shared a lot of the same ideas, including the following:

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  • Minimum budgets (for small schools) and per student/per square foot budgets should be increased (typically to $25,000 and $250/student).
  • Budgets should be calculated district-wide, rather than on a building basis.
  • The new Category 2 budgets should apply for 2020 and continue for five years (instead of a rolling five-year period).
  • Network security devices and services should be added to the Eligible Services List, specifically enhanced firewall features, CIPA filtering, and other cybersecurity features.
  • The eligibility of Managed Internal Broadband Services (MIBS) and Basic Maintenance of Internal Connections (BMIC) made eligible in 2015 for only a five-year period, should be continued.

Our belief is that the FCC will go with what these organizations have suggested, but we won’t know until the FCC publishes its findings. Stay tuned to this blog and this webinar for breaking news.

In the meantime, how should districts who are planning out their 2020 budgets prepare? While the waiting game may cause some anxiety, here are some guidelines to keep in mind. Caveat: Until the FCC issues its final ruling, these are all assumptions, and nothing is set in stone. No matter what eventually transpires, be sure to get your paperwork filed promptly. (In 2019, the window for filing closed at the end of March.)

  1. The news is likely to be good. Despite uncertainties about the FCC’s final decision, predictions indicate that there will be enough funding available to meet the demand in 2020. Therefore, there has likely never been a better time to apply for funding. Visit the USAC to learn about the application process.
  2. If you are still in your first five-year budget period (meaning the first year you received any Category Two funding was FY 2016 or later), you may not see substantial changes. It’s possible you will see any of the following minor changes: your individual school budgets may be transferred to a district-wide budget (meaning you would be able to allocate the equipment toward any school site), and it’s possible that your budget will be reset to start over for FY 2020 in a new five-year cycle.
  3. If you have completed your first five-year budget period (meaning that the first year you received any Category Two funding was FY 2015), you may have a brand new five-year cycle. You may see the following changes: a) a new five-year cycle will probably be approved for you; b) individual school budgets may be replaced by a district-wide budget system; c) you may no longer be eligible for BMIC (Basic Maintenance of Internal Connections) and MIBS—this depends on when the FCC takes action.
  4. In a supposed “worst-case scenario,” there would be no utilization status reset, and “rolling” budgets would be implemented instead of static five-year blocks. This would mean that applicants who were committed Category 2 funds in FY2015 would have that amount “returned” to them in addition to their FY2020 budget calculation.
  5. On the other hand, in a supposed “best-case scenario,” the FCC could reset all budgets across the board, making FY2020 like FY2015 was, where every school (or library) has its whole budget available to them.

To learn more about Category 2 E-Rate funding, register now for our upcoming webinar. During this exclusive, interactive event, our speakers, Brian Stephens, a Senior Compliance Analyst for Funds For Learning, and Sarah Bryant, Extreme Networks’ K-12 Education Specialist, will provide breaking E-Rate news and share best practices when filing for E-Rate.

This blog was co-authored by Sarah Bryant, Extreme Networks’ K-12 Education Specialist. 

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