Tom Wheeler

Even though there is around $5 billion in unspent taxpayer money sitting in the E-Rate account right now, FCC Chairman Tom Wheeler seeks to increase the amount that is spent by the United States’ E-Rate program from $2.4 billion to $3.9 billion. That equates to a 1.5 billion dollar and 62% increase in the fund overall and 16 percent increase in phone customers’ monthly bills overall.

Although the E-Rate program has increased Internet access to schools and libraries, E-Rate needs to be revamped and streamlined instead of wastefully expanded.

American Action Forum’s Will Rinehart discusses the true ramifications of an expansion of E-Rate. This expansion increases spending nearly 123 percent from 2008 levels. Rinehart analyzes how the “contribution rate” or tax rate that consumers pay to support this program has grown dramatically in recent years. With this proposed expansion, we would see a contribution rate of 19.3 percent, more than double the rate of 9.5 percent we saw in the first quarter of 2009.

Five main problems with the current E-Rate system include:  the massive amount of paperwork, the need for outsourcing to consultants, misplaced funding priorities, excessive delays for funding, and poor incentives that favor those who know how to play the system rather than those who genuinely need help.

Instead of increasing funding through raised taxes, E-Rate needs to be pored over with a fine tooth comb in order to understand how to make the current program run more efficiently. Simply throwing more money at the problem is a lazy, temporary solution. Disciplined reform is the only way to effectively make E-Rate a capable and successful program. 

Commissioner Ajit Pai has previously made comments in support of reforming the E-Rate program instead of simply expanding it. In his words, “Instead of a student-centered E-Rate program, we now have one too heavily focused on bureaucracy.”

In July of 2013, Commissioner Pai proposed a simple, four-step, student-centered fix that would not adversely affect taxpayers. The first step would be to revise the distribution of E-Rate funds so that a certain amount would be given to a school per student, with that amount contingent on poverty levels and rural locations. So, these funds would follow students throughout school. Next, spending would be focused on the areas that need it most—connecting individual classrooms to the Internet, rather than focusing on voice services. Third, the E-Rate application process would be simplified down to a one-form initial application and, later on, another one-form report. Finally, greater disclosure of how funds are spent, and an accompanying website that allows anyone to access this information would increase transparency and accountability.

In their statements Monday, November 17, 2014, Commissioner Pai and Commissioner Mike O’Rielly reiterated that the FCC is making the same mistakes it made during its E-Rate proposals last year. Essentially, the Commissioners argue that E-Rate needs to be reformed instead of expanded.  Although mistakes were made last July, the FCC needs to right this wrong and take steps to overhaul the program.

Increasing funding will only encourage continued inefficiency. E-Rate needs to see wholescale reform instead of spending increases that will only encourage further misuse of funds.