Is the FCC’s Emergency Connectivity Fund the Right Way to Fund School Technology?
Readers are encouraged to follow along and do their own investigation of the data as they read this article. A fully interactive dashboard and map of all ECF funding data is available at: https://go.ncsu.edu/nationwideECF
In 2021 the Federal Communications Commission (FCC), at the behest of Congress, implemented the Emergency Connectivity Fund (ECF) to help alleviate the remote learning challenges many schools were experiencing due to COVID. Legislation creating the ECF, provided a one-time appropriation of $7.17 billion in tax dollars. Unlike the FCC’s Universal Service Fund (USF) programs, for example, E-rate and Lifeline, which are funded by fees collected from telecommunications customers, ECF is funded by appropriation by Congress.
The stated goal of the ECF is to provide connectivity to students who were engaged in remote learning as a result of COVID[1]. Eligible expenses include student devices (e.g. laptops, Chromebooks, and tablets) as well as home connectivity solutions such as LTE hotspots and other types of last-mile connectivity. Unlike E-rate, the USF-based program for school (and library) connectivity, ECF allowed home internet access to be subsidized, via the student’s school district. Schools apply for ECF, but provide the technology directly to the students in the form of devices (laptops, tablets) and/or connections to the internet at their homes. Normally the FCC Lifeline and Connect America programs would be used to provide residential access, with funds going directly to service providers, not an intermediary.
We will analyze how the ECF is being used, what problems it is helping to solve, what problems it is creating, and give reasons why Congress and the FCC should not extend or enhance the program any further, and instead should focus and streamline efforts on other federal programs with similar goals.
Structural Differences Between E-rate and ECF
For two decades the FCC E-rate program has been wildly successful in providing equitable internet access to K-12 schools across the nation. In North Carolina specifically, the program provides about $75,000,000 per year of federal funding, applied against about $25,000,000 in state tax dollars. This funding provides every public school with a fiber internet connection and every classroom with Wi-Fi access. Led by the North Carolina Department of Public Instruction, and supported by the Friday Institute for Educational Innovation and the North Carolina Research and Education Network, the NC School Connectivity Initiative is a shining example of how to implement equitable access while minimizing cost and maximizing tax dollar value.
E-rate is one of four FCC programs that are internally funded by fees collected by the FCC from telecommunications providers. No federal tax dollars are used to fund these so-called “Universal Service” programs. In terms of USF funds disbursed to recipients annually, E-rate is generally about $2 billion of the $8 billion USF program. So the one-time ECF program, appropriated out of thin air, rather than funded by fees, is about the size of a year of all USF programs combined.
With E-rate, each school district (or library) must publicly post bids for services and products for at least 28 days, using the federal bid announcement tool, lovingly known as the FCC Form 470. If local procurement requires it, then local bidding regulations must also be followed in parallel. At a minimum, the world is notified anytime a school seeks to procure internet technology that will be subsidized by USF fees, namely E-rate. All of this is managed via the non-profit Universal Service Administrative Company, USAC.
Each school district receives an “E-rate discount” which is based on the percentage of students that receive subsidized school lunch (the National School Lunch Program, NSLP) and the number of schools in the district located in census blocks designated as rural. Thus, less wealthy and more rural school districts receive a higher E-rate discount, all else being equal. The discounts range from 20% (very rare) to 90%. In North Carolina the average E-rate discount is about 75%; this means that for every $3 provided by the FCC, the school district must provide $1 towards the procurement. Even the few, very poor rural districts, with 90% E-rate discounts are still on the hook for 10% of their procurement total cost. That 10% is enough to help ensure school staff are prudent in their technology selections and do not “overbuy”. Unfortunately, Congress waived the requirement for the schools to have any funding responsibility for ECF. All ECF procurements are 100% discounted; the federal government pays all the costs. Still worse, for ECF, Congress waived the requirement for a publicly bid procurement, allowing schools to pay whatever price is “within reason” to any and all vendors that sell to the school.
Luckily, many districts (but not all) are still required to follow local and/or state procurement procedures. The key safeguards in place for ECF are a $400 cap per student on the cost of devices and a “within reason” metric as determined by USAC reviewers. The skill range of the USAC reviewers varies widely; it has been particularly difficult for USAC to employ knowledgeable reviewers through COVID.
While the USF has its own set of issues, namely the way in which the funds are collected (that’s the topic of an entire article itself), at least USF is a zero-sum game for the taxpayers. USF only distributes an amount less than what is collected and even recovers program administration costs internally. ECF on the other hand is using long-duration federal debt to pay for devices with a useful life of about four years. Thus, many students who receive laptops today from ECF will end up paying for their subsidized laptops, years later, in their income taxes as adults.
Many of the students who received laptops funded by ECF will be paying income taxes to cover the cost of those laptops, years after they graduate from high school.
I know of no other subsidy in which publicly bid procurement rules are waived and the subsidy is 100% of the cost of the item being procured. ECF is a one-time reaction by Congress to throw money at a problem, with no plan for sustainability or equity.
ECF Usage
My colleague, Mike Babb, and I have been analyzing the publicly available ECF data and have created a nationwide ECF dashboard. This interactive dashboard is updated monthly as the program progresses. All ECF applications are displayed on an interactive map and various filters can be applied. You can hover over a district or entity and see details about the amount of ECF provided as well as other data, such as the number of students in the district. All ECF-eligible entities, including private schools and libraries, are represented and filterable. Once you have set the filters you like, you can even download the raw data directly from the dashboard to an Excel or csv file.
Figure 1. Funded and pending ECF for all entities. (Continental US only)
Below is a dashboard that shows only North Carolina public school districts, excluding charter schools, private schools, and libraries. Denied and canceled funding requests are also filtered out. North Carolina districts are seeking about $175 million in aggregate. Darker colors on this map indicate a larger total funding request. Not surprisingly Charlotte, Greensboro, Winston-Salem, Fayetteville, and the state’s fastest-growing district, Johnston County, are the largest requesters. Since Wake County (Raleigh/Cary/Holly Springs/Wake Forest) is a comparatively wealthy county, it is nice to see they didn’t go “all in” on ECF.
Figure 2. Funded and Pending ECF for all NC school districts.
Back in the national dashboard, by changing the “Item” filter, we can filter out laptops, tablets, and sales tax (more on that later) and see that North Carolina school districts are only seeking $29 million for connectivity in ECF. Thus, about $147 million (83%) is being sought for laptops and tablets. While this $147 million one-time windfall is certainly appreciated by these districts, what is the plan for sustainability and replacement in four years when these devices are worn out? Additionally, there is no funding in ECF for educational content. While many students will receive devices as a result of ECF, what content will they use on them? How teachers are being trained to effectively use the devices also remains unknown, and likely varies widely from district to district.
Figure 3. ECF excluding laptops, tablets, and tax for all NC school districts.
The trend to use ECF for student devices is not unique to North Carolina. Looking at the nationwide data, using the Items view in the dashboard, we see that connectivity is really only a secondary consideration. Over $5.12 billion, a whopping 67% of the $7.7 billion sought, is for laptops and tablets, excluding sales tax.
Figure 4. Nationwide ECF requests, by item type.
Questions to Consider
I don’t deny that students need a device (laptop or tablet) to access the internet. Laptops typically have a useful life of four years in the K-12 environment. Has the federal government just set the stage for a massive technology deficit in 2026? If a district had not already transitioned to digital learning, what value is there in dumping billions of dollars of student devices on staff that is not prepared to effectively use them, with no funding for digital content, teacher training, and program evaluation?
Was there in fact a $5.4 billion technology deficit in our nation’s schools before COVID? Should local leaders be making the case to fund digital education with local tax dollars, or is this really a federal problem?
Does it make sense that the federal government, in effect, bought almost every student in New York City a laptop? Does it make sense that ranchers in Wyoming, many miles from the nearest fiber, had federal tax dollars for “emergency connectivity” go to students in one of the most connected, fiber-rich cities in the world, also home to one of the largest concentrations of millionaires in America?
Many will note that the citizens of New York also paid their share of taxes. But if we are talking about connectivity, should not the federal subsidy be prioritized where connectivity is lacking the most, and the access to the fiber the most inequitable? These are just some of the questions that can be investigated with this dashboard. We have provided various filters and views and integrated other data sources to try and provide a transparent view of how and where the ECF funding is being used.
Following the creation of ECF, Congress did allocate tens of billions of dollars for fiber deployments, but that will take many years to play out, and many are skeptical that the maps of locations in need of federal subsidies are accurate or fair.
Figure 4. New York City ECF requests (laptops and tablets only).
Per Capita Funding versus Per Student Funding
The dashboard also provides a state-level view, with an interesting twist. Below we see the total ECF request by state, but the size of the box is proportional to the total ECF received per capita (total state population, not student enrollment). This paints an interesting picture of how ECF is distributed, with Alaska leading the way at $122 per capita. In the graphic below, the darker the box, the higher the total ECF; the bigger the box, the higher the ECF per capita.
Given its extreme ruralness, Alaska receiving the most per capita ($122) seems logical. The cost of connectivity in Alaska is insanely high. But how is Washington DC, at $57 per capita, the second highest per capita recipient? Meanwhile, Wyoming, with even fewer people than Washington DC received only $11 per capita. For the curious, Washington DC has more residents than the entire state of Wyoming, but Wyoming is over 1,400 times larger than DC. It would seem that emergency connectivity in rural Wyoming might have been more expensive than DC. It would also seem that the rural connectivity disparity in Wyoming might be far greater as compared to Washington DC.
Only about $8 million, or less than 10% of Alaska’s funding requests are for student devices; the majority of that state’s request, not surprisingly, is for satellite, microwave, and wireless connectivity.
Figure 5. ECF by state, per capita (total population).
USF Net Flows
Keeping in mind that “normal” E-rate funding is provided by fees collected in each state by telcos, let’s examine the typical funding flow for E-rate when the normal rules and regulations are in place. Figure 6 below shows the total (pre-COVID) 2019 USF contributions versus disbursements. That interactive map is available at https://go.ncsu.edu/2019usfmap and is worthy of another article on its own.
In the nationwide map, we see that North Carolina, for example, is a net exporter of USF funds. That is, for every $1 collected from NC ratepayers, 73 cents comes back to the state (in USF programs) while 27 cents goes to other less connected states. Also, note that most of the rural midwest states are net receivers. We will revisit this data later in this article.
Figure 6. USF net dollar flows by state. Orange states are net exporters of USF, blue are net receivers.
State Sales Tax
Digging deeper into the ECF data, we find a concern. Of the $7.7 billion in ECF requests, $164 million is for state sales tax and “reasonable charges.” Even if we assume half of the “taxes and reasonable charges’’ bucket is actually state taxes, we still arrive at over $100 million in federal tax dollars being deposited into the general funds of the various states. I have never seen a $100 million federal program that didn’t come with a hundred rules and regulations attached to it. This is a wealth transfer, with no rules, to the states, and in particular (and even more unfairly) to the states with the highest state sales taxes.
As an example, in 2021 (during COVID), the National Telecommunications and Information Administration (NTIA) instituted a program to provide broadband funding to historically black colleges and universities. That program, known as Connecting Minority Communities Pilot Program, which totaled $285 million in grants, came with seven pages of single-spaced, small font, triple-columned rules in the Federal Register, along with over a dozen pages of forms, applications, and attestations. How can we justify giving states $100 million, no strings, no rules, to some (the ones with the highest state sales tax) state legislatures, while requiring institutions of higher education to follow strict regulations for a commensurate amount of funding, from the same source, namely the US taxpayer? Since realizing this, I have been advocating for a 100% state sales tax in North Carolina on all school networking gear purchased on an E-rate bid contract.
In the following diagram, the larger the box, the more total dollars in sales tax and reasonable charges went to the state.
Figure 7. ECF state sales tax and reasonable charges, only.
Digging even deeper, and looking at how sales tax is being distributed by state we see even more concern. Unfettered by any federal regulation, these state legislatures will receive windfalls of millions to spend on whatever they desire. While it is true that these states pay taxes, the purpose of the program is to provide emergency connectivity, not to be a cash grab, disproportionately rewarding states that have the highest sales tax rates. And when you consider that ECF is paid for with federal debt, it seems even more unfair.
About $50 million in federal tax dollars (debt) has been transferred from the federal taxpayers to the legislature of California, with absolutely no federal regulation, or requirement to support broadband, a federal initiative or any federal oversight.
Vendors
The dashboard allows us to investigate which vendors were used and for what types of products. Five vendors will receive over a quarter billion dollars in revenue each. Not surprisingly three of them sell laptops and tablets, namely CDWG at $1 billion followed by Apple and Dell. The top telecom service providers are T-Mobile at $730 million followed by Verizon (all states) at $353 million. Again, not surprising that the biggest single vendors provide cellular services which, in populated areas, are probably the quickest way to get students connected in an emergency.
Figure 8. ECF by vendor and item.
Consultants
One of the great features of complex government regulation is the cottage industries that are created to manage the regulations and workflow. We’ve all seen the commercials to make sure you know your benefits, be it social security, veterans benefits, Medicare, or whatever. Just about every federal program has an industry dedicated to helping people maximize their utilization of the program.
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While I have had the privilege of working with many excellent E-rate consultants, not all of them are great. E-rate is a complex process, with numerous forms, reviews, and procedures with strict deadlines. Consultants provide insights and are particularly helpful in smaller districts where staff simply does not have time to learn and follow every FCC procedure, with critical funding swinging in the balance.
Of all $7.7 billion in funded and pending requests, $5.5 billion (78%) were filed with the help of a consultant. This is about the same percentage of requests for E-rate that are filed with the help of consultants. The interactive dashboard allows users to look at the relationship between vendors, consultants, and the items they procured for the schools. This analysis is left as an exercise for the reader.
Figure 9. ECF consultants. Darker green boxes indicate a higher number of individual clients, while larger boxes indicate a larger total procurement value.
Libraries
Libraries are important anchor institutions, and with the help of consultants, they really went all-in on ECF.
$220 million of the $288 million requested by libraries was with the aid of consultants. Libraries split their ECF funding about half for patron devices and half for mobile broadband and hotspots. Libraries have traditionally under-utilized E-rate for a number of reasons, but the complexity of the process often ranks as a leading reason why E-rate is not used more often.
Figure 10. ECF in libraries, by item.
Half of the ECF for libraries is concentrated heavily in just a few (less than 10) counties. California, Maryland, and Texas accounted for over half of the funded ECF requests in libraries as of October 2022.
Figure 11. ECF in libraries, in the continental US. (Funded and pending as of October 2022.)
Funding by State Population and Density
Next, let’s look at the relationship between ECF funding per resident and population density, by state. I have color-coded the points by the percentage of net import or export of USF fees in the state. A net export of USF funds means that a state collected more USF fees than were disbursed within the state across the four USF programs, in 2019. While the rules and regulations might not be perfect, the overarching idea of universal service is that locations with good connectivity (back when the Telecom Act was written, it meant interstate telephone) would subsidize the buildout in locations that had poor connectivity.
As shown below, all of the higher population density states are net exporters of USF fees (red). All of the lowest-density states are net importers, to varying degrees (green). The green states below the trend line are likely not utilizing ECF as much as they utilize the USF programs. This could be for a number of reasons, but Figure 13 shows the striking difference.
Figure 12. Total ECF funding as of October 31, 2022, by population density, color-coded by USF net disbursements.
Below, the pre-COVID, 2019 USF disbursements scatter plot shows that normally, in USF programs, funding per resident is biased towards lower population density states. Whether ECF should have been architected to work in a similar fashion is likely up for debate. Many policymakers have referred to ECF as the “device program” which would indicate it was intended to be focused on buying laptops and tablets from the start. Again, the following diagram is USF, not ECF funding per resident by population density. If ECF was supposed to mimic the distribution “equity” of USF, figures 12 and 13 would look similar.
Figure 13. Total USF funding for 2019, by population density, color-coded by USF net disbursements. (Excludes Alaska and Hawaii)
Below is ECF funding by total state population, color-coded by population density. New York, Texas, and California are above the trend line, indicating that they utilized ECF at a higher rate than average when considering only the total state population. Florida and Pennsylvania significantly underutilized ECF relative to their peers. I suspect Florida is lower because the median age in that state is higher than the national average, meaning fewer students per capita to be funded through their school districts.
If Congress intended to simply distribute funding for laptops and connectivity with a one time $7 billion appropriation, why not just run that through the Department of Education as a per-student allotment and let the states distribute the funds. It is unclear how inserting the FCC and USAC into the funding stream which largely amounted to student devices being procured makes sense. While some of the rules related to E-rate were used, it is not clear that those rules made much of a difference in the funding allocation. For example, just looking at the $3.7 billion of funded requests in ECF Window 1, the discount bands are all over the place (see Figure 16 for details). Basically, any school or library that filed a reasonable application received funding, regardless of rurality or wealth level.
In light of the fact that ECF funds were largely distributed on a per capita basis at the state level, the regulatory burden that ECF created on the school districts, the FCC, and USAC seems inappropriate and misplaced. Again, the interactive dashboard, which allows you to drill down into the data is much more interesting.
Figure 14. Total ECF funding as of October 31, 2022, by population and color-coded by density.
In the following diagram, the box size is proportional to the total funded amount, subdivided and color-coded by the item type. This is just a screenshot; the interactive dashboard is far more interesting.
Figure 15. Total funded ECF projects as of November 16, 2022, by state and item procured.
Is ECF Equitable?
With the 2014 rulemaking process to modernize E-rate, many positive and useful changes were implemented. Most significant was the move from so-called Priority Two funding to Category Two funding, to provide a per-student “funding budget” over a 5-year period for networks inside the school building, namely Wi-Fi and Ethernet. The discount rate for Category Two is similar to that of Category One (connections to the school).
ECF did not follow the Category Two rules completely. The FCC was wise to place a $400 per device upper bound on ECF-funded laptops and tablets; however, the way funding is being allocated is less than precise in terms of identifying the most disadvantaged and providing funding to “level up” those schools and libraries.
Below is the breakdown of funded ECF by E-rate discount and Urban/Rural status. The large blue boxes are laptops and tablets, while the green boxes are mobile broadband and hotspots. More than half of the total ECF funding went to entities with higher than 80% E-rate discounts. Regardless of rurality, an 80% discount at a school district equates to at least half of the students receiving free lunch in the National School Lunch Program.
Figure 16. Total funded ECF projects by E-rate discount, as of November 16, 2022. Color-coded by item procured. Teal is laptops and tablets; green is mobile broadband, and Wi-Fi hotspots. See the dashboard for more details.
Funding USF for the Long Run
ECF was a reaction to an emergency, at a time when there were many, many unknowns. We cannot fault our leaders for trying to take mitigating steps in unknown times. Some people are calling for another round of ECF. I am not inclined to think this is prudent, after digging into this data for months. I think we need to move on from the “emergency” state and plan for the steady state. We need to plan for the long-term sustainability of technology used in our schools, in light of the fact that tens of billions of dollars are being spent on fiber deployments via the FCC, NTIA, USDA, and US Treasury.
I believe the data presented here shows that ECF is not a sustainable, equitable, or an entirely fair program. It is somewhat of a free-for-all, with all the administrative burden of E-rate, but not all of the rules and checks and balances. In contrast, the USF E-rate program has been operating for over two decades, and under the modernization rules of 2014, has been far more equitable and successful than just about any other school funding program at the federal level.
However, there are concerns with E-rate’s stability and longevity. In fact today, there are pending federal lawsuits challenging the constitutionality of USF at large. Additionally, the “contribution factor”, or the amount that carriers are being “taxed” for interstate telecommunications for USF is at all-time highs, and is not sustainable. Rather than assessing USF fees on interstate phone revenues, why not “tax” broadband, based on the advertised speed of the connection? Applying the fee to interstate call revenue is an outdated dead end. I suspect one day fax machines will no longer be deemed HIPPA-compliant and overnight millions of phone numbers will disappear. Homes with landlines have been declining for a decade or more and many businesses are going to softphones or just providing a stipend for employees to use their personal cell phones.
USF should be a wealth transfer, in an orderly, fair, equitable, and measurable fashion, from the internet haves to the internet-have-nots. This is not difficult to accomplish, once everyone realizes what is at stake, and what could be done to increase equity of access. Other nations are working diligently to make sure their next generation is prepared for the workforce of the future. It is imperative that the US continue to lead the world in communications innovation and leverage our decades of investment to maximize the educational experiences available to our students.
Some of the ways Congress and the FCC could work to ensure E-rate remains viable are:
- Stopping USF-funded fiber overbuilds that only connect schools and libraries. USF should enable competition for the entire community. Today, too many fiber providers are cherry-picking E-rate customers and leaving neighboring communities without access.
- Work to make E-rate more accessible to smaller rural schools still in need of high-speed internet. Consider allowing E-rate consulting fees to be reimbursable for districts with less than, for example, 500 students.
- Taxing (umm, I mean assessing USF fees) on last-mile broadband, using a marginal rate, based on the service provider’s advertised speed. Don’t tax connections less than 50 Mbps.
- Slowly (over 10 years) shifting the discount matrix to lower discounts. Given the tens of billions being spent on fiber over the next five years, the price discrepancy in internet and WAN costs based on rurality should be reduced. At some point, local funds should be able to provide reasonable cost-effective internet access with no, or at least a lower federal subsidy.
- Making key cybersecurity products Category Two eligible, in particular modern firewalls and intrusion prevention systems. Too many schools have built networks without considering how to properly protect them. The FCC can easily provide leadership. Spending $2 billion per year on E-rate and not enabling cybersecurity as part of that funding seems like a recipe for disaster.
- Creating a “broadband peace corps” whereby community college graduates of certified IT programs receive loan repayment after some number of years of public service in IT jobs in public schools and local government. One of the biggest impediments to wide scale broadband is the lack of local talent in our rural communities. We need to engage rural students, train them, and enable them to make a decent living without having to move to a big city.
The E-rate program has been hugely successful and needs to be in place for at least the next ten years. Eventually, we may find ubiquitous competition in internet access, but until we get there, E-rate and the other USF programs will be needed. ECF, while well-intentioned, may have set some schools up for a technology refresh in four years they were not expecting to have to fund. Local leaders need to be planning today so they can afford to replace the laptops and tablets that were purchased through ECF this year. Teacher training and access to quality educational content are also important topics, but not anything I would want the FCC or USAC to be involved with. We must keep E-rate sustainable, and focused on the things the FCC can (and should) be addressing, namely high-speed connectivity to all schools and their surrounding communities.
A note on the data
Data used to develop the dashboards was gathered from publicly available sources at the US Census, FCC, and USAC websites. We have noticed corner cases in the USAC data that might cause minor errors but we have not found any significant errors as a result of using the unedited USAC data. Corner cases might include consortia filings and overlapping districts and libraries. USF funding at pre-COVID levels from 2019 was used for all net import/export calculations.
Endnotes:
[1] Per FCC, “close the Homework Gap for students who currently lack necessary Internet access or the devices they need to connect to classrooms.
