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The Winners, and Losers, in E-Rate Modernization

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What industries will be most likely to win—or lose—in the federal plan to overhaul the E-rate and invest more than $2 billion into wireless technology over the next two years?

The E-rate modernization order, officially released on Wednesday, will boost E-rate payments to schools and libraries for Wi-Fi, with $1 billion in years one and two, and an annual "funding target" for $1 billion for years beyond that. The order was approved by the Federal Communications Commission by a 3-2 vote on July 11.

Education Week asked four industry organizations to weigh in on the "winners and losers" question. Here's how they see the picture.

Winners

The respondents see businesses that supply broadband as reaping rewards from the decision.

"Broadband providers of all types will be winners," said Evan Marwell, the CEO of EducationSuperHighway, a San Francisco-based nonprofit that advocates for improved school connections. He included telephone, cable, competitive local exchange carriers, and fiber companies in that category of broadband providers.

 He also said gains can be expected for companies that:

  • Help school districts deploy Wi-Fi networks, including those that make the equipment—both local area networks (a computer network that connects computers within a limited area) and Wi-Fi;
  • Offer managed Wi-Fi services;
  • Help districts purchase these networks; and
  • Provide caching servers, which is a new eligible service under the program. (A cache server speeds access to data and reduces demand on an enterprise's bandwidth by temporarily storing web documents and images.)

Ed-tech companies will gain by having more students capable of accessing broadband in schools, predicts Doug Levin, the executive director of the State Educational Technology Directors Association.

Mark Schneiderman, the senior director of education policy for the Software & Information Industry Association, agreed.

"We know the interest in digital content and tools is great," he said in an email. The connectivity barrier to meeting that demand will be "significantly reduced" under the approved order, he said. Enhanced connectivity through the E-rate will "empower teachers and students to access a richer set of digital learning applications and services," Schneiderman said.

In addition, local installers of data networks will also benefit, said John Harrington, the CEO of Funds for Learning, an Oklahoma-based consulting firm.

"This isn't just going to benefit some company in Silicon Valley. To be installed and utilized, there's somebody in Topeka who's going to raise the ceiling tiles in schools in Topeka," he said.

Losers

The biggest losers, Levin predicted, will be smaller players who "used to be eligible for reimbursements under E-rate, but are no longer."

Website-hosting, email-hosting, paging, and voicemail services also fit this category. They are part of the services whose E-rate funding is being eliminated, beginning in funding year 2015.

The E-rate's support for voice services is also being phased out at 20 percent the first year, and 20 percent the second, with the discounts applicants receive for these services being reduced by an additional 20 percentage points in each subsequent funding year. An analysis of the impact of reduced funding will be made after the second year.

The gradual change is not expected to create a major impact for voice carriers in the near future.

"They're not saying voice isn't important or that it's not going to be there," Harrington said. "They've just adjusted where the money will be going." Schools that have voice-over Internet protocol, or VoIP phone systems, receive and pay for their voice service via broadband.

Among broadband providers, the only ones that will lose will be companies that "don't invest in their networks, and thus can't provide the speeds that schools and libraries need," said Marwell. In addition, as broadband pricing is shared, losers could be those that "overcharge schools and libraries for their services," a fact that will become clear under the increased transparency provision of the order, Marwell said.

The real winners are the schools and libraries that will be getting funding for internal Internet connections that were unavailable before, Harrington said.

"Within schools and libraries, that's been the big digital divide," he said. "There's been E-rate funding to connect to the front of the building, but they're not able to connect back to students."

The FCC's official "Modernizing the E-rate Program for Schools and Libraries: Report and Order and Further Notice of Proposed Rulemaking" is available here.


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