The FCC´s E-rate Program: Alive and Kicking

Many schools and libraries across the country rely upon the federal funding program known as the "E-rate," which will soon enter its seventh year. This popular program provides funding to schools and libraries for their telecommunications needs and is funded by taxes on all consumer telephone bills. Over the past six years, the Federal Communications Commission (FCC) has disbursed nearly $2.5 billion annually to E-rate applicants, helping schools and libraries purchase servers, long distance telephone service, voice mail and other critical telecommunications services.

But the E-rate is not without its troubles. Allegations of fraud, waste and abuse in the system have plagued the program for the past several years, and in 2004 Congress held a series of hearings to deliberate these problems and craft solutions. The FCC also stepped in by adopting regulatory procedures designed to curb abuse. These changes make it all the more important for schools and libraries to ensure compliance with new E-rate rules.

In addition, the E-rate program has had a more immediate problem for applicants since August 2004. It was determined by E-rate administrators that an obscure mandate contained in the federal Anti-Deficiency Act applied to the E-rate program, which effectively required the program to cease funding distributions to all schools and libraries. The consequences were immediately obvious to E-rate applicants, who were facing the unwelcome prospect of paying for 100 percent of the telecommunications services they had purchased. Similarly, service providers became concerned about nonpayment issues.

Fortunately, this potentially devastating problem has been fixed by Congress – for now at least. On December 8, 2004, the United States Senate passed legislation¹ granting the Universal Service Fund (of which E-rate is a part) a one-year exemption, through December 31, 2005, from the accounting provisions of the Anti-Deficiency Act. The House of Representatives easily passed the measure, and the President is expected to sign the legislation into law.

In short, despite all the adversities faced this year, the E-rate program is alive and kicking, and all eligible schools and libraries should take advantage of this tremendous funding resource. Further changes are on the horizon, however. It is anticipated that Congress will consider further legislation next year to address fraud and waste in the system.

The E-rate program is complex and punishes those who fail to do their homework. The new funding round begins soon. E-rate applicants and E-rate service providers alike should consider hiring competent counsel to ensure that their operations comply with E-rate rules and for assistance preparing the complex E-rate forms and, if necessary, filing appeals with the FCC if funding is denied.

The content of this article does not constitute legal advice and should not be relied on in that way. Specific advice should be sought about your specific circumstances.