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Feds Are Fed Up With AT&T's Lame Excuse For Abusing E-rate

In late July, the FCC released a Notice of Apparent Liability (NAL) in which it found the telecommunications giant AT&T Southeast liable for a $106,425 forfeiture. The agency also ordered the company to return $63,760 of E-rate funds it described as “improperly disbursed.” AT&T overcharged two school districts in Florida and, in a response released last week, are trying to justify their pilfer by blaming the E-rate rules and the schools themselves, much as a criminal blames victims for being such easy targets.

Funded By Phone Users

E-rate funds are collected as a surcharge on telephone bills; the funds go to schools to help pay for telecommunications costs at schools, including telephone, Internet access, and infrastructure costs like fiber network construction. The amount a school district receives depends on the number of students in the district that qualify for free and reduced lunches; schools with higher numbers of low-income students are reimbursed at a higher rate. Given that many of our schools are funded through property tax rolls, this means that schools in poorer neighborhoods that are more likely to need help with their budgets receive the higher reimbursement rates.

According to the program rules, phone companies and Internet Service Providers (ISPs) that participate are required to offer the “lowest corresponding price” to schools. Providers aren’t permitted to charge rates that exceed the “lowest corresponding price” or bid higher than that price on contracts to serve similarly situated entities if those entities are eligible to receive E-rate funds. School districts do not carry the burden of getting the lowest corresponding price - telephone and Internet access providers are responsible to ensure that they offer the lowest price in exchange for the opportunity to participate in the program. Between July 2012 and June 2015 alone, AT&T received $1.23 billion in E-rate funding nationwide.

Filching In Florida

In Orange County and Dixie County, AT&T charged the districts prices that were 400 percent higher than other phone rates in Florida, claims the FCC. Their investigation focused only on two types of telephone services. The FCC noted that when Florida deregulated phone services in 2011, AT&T “dramatically increase[d] its pricing.” According to the the NAL, the company repeated the pattern between 2012 and 2015. Each year AT&T would file paperwork, falsely claiming they had followed the rules regarding price.

The NAL describes AT&T’s substantial rate increases after 2011 for the two types of phone service. Increases occurred every year and “both Districts paid among the highest rates of all non-residential customers” which contradicts the purpose of the E-rate program. When pressed as to why they increased rates so dramatically:

Indeed, AT&T has not offered any justification for its pricing at all despite requests from the Enforcement Bureau (Bureau). We are left to conclude that AT&T sought to maximize profits at the expense of the Districts and at the expense of the publicly-funded E-rate program. 

This isn’t the first time big telephone providers have been known to push the limits of the rule. Verizon and others have been criticized for similar behavior but this is the first enforcement action for violating the lowest price requirement. Back in 2012, AT&T was caught overcharging schools for telephone service by 325 percent. In 2010, a Detroit Public Schools audit recommended $3 million be recovered from AT&T, in part because the telecom had not provided the lowest corresponding price. There are other reported instances and probably numerous unreported ones.

AT&T's luck appears to have run out, however, because the FCC seems to have had enough of the bad behavior. In calculating the amount of the fine, the FCC focused only on the instances of false reporting and limited the number of years they included. Considering the large sum of money AT&T has taken from the program, and their pattern of misbehavior, the fine could be much higher. For more on how it was calculated, check out the Common Law Monitor


AT&T Responds

On August 26th, AT&T filed its response to the NAL and posted a blog the same day. The company argued that they charged the school districts higher rates because they chose to receive services on a month-to-month basis rather than via one-year contracts. The FCC disputes that conclusion, determining that the districts inherently requested one-year service as a matter of course.

Charging more for month-to-month contracts is the way telecom businesses typically operate, which gave AT&T an excuse to increase telephone rates by 400 percent. How convenient that school administrators did not feel the need to shout, "We want an annual contract!" at every turn - their mistake.

The FCC also found that AT&T should not have charged such exorbitant rates because of the presence of the state's E-rate Consortium. The Consortium allows schools to band together and negotiate for lower rates. The schools did not belong to the group but, because it reduced possible rates for similarly situated entities that qualify for E-rate, AT&T was not permitted to charge rates higher than those available to those in the consortium. The company argues, again, that the schools wanted month-to-month service, rather than the yearly contracts that are negotiated for consortium members, so the rates did not apply.

AT&T claims that the "lowest corresponding price" rule is not well-defined and blames their decision to apply a price 400 percent higher than acceptable on that ambiguity. 

Solid Track Record

AT&T has proven to be a virtuoso of swindle over the years, typically in the form of shifty rate practices. David Cay Johnston has written about AT&T's stylistic theivery perfectly described by an incident involving his friend Bruce Kushnick:

When he cross-checked his aunt’s telephone bills over the years, he could hardly believe the numbers. His aunt paid $9.51 for her local phone service in 1984. By 2003 her bill had swollen fourfold to $38.90. In the two decades since the breakup of the AT&T monopoly, even after adjusting for inflation, his aunt’s telephone cost $2.30 for each dollar paid in 1984. And that was without any charges for long-distance calls.

Taking advantage of elderly ladies, school budgets, and taxpayers are all in a day's work at AT&T.

Lake Oswego Schools Opting For Dark Fiber

Lake Oswego School District (LOSD) in Oregon is set to make an investment that will save up to $301,000 per year in telecommunications costs - its own dark fiber network.

To Lease Or To Own? There Is No Question!

LOSD is the latest in a string of local schools that have chosen to invest in fiber infrastructure for long-term savings. Caswell County, North Carolina, is also investing in dark fiber with an eye on the future. Because the school district will own the network, they will no longer be surprised by unexpected rate hikes, making budgeting easier. The money they save can be directed toward other programs and, because it is dark fiber, they are only restricted by the equipment they install and the bandwidth agreements they enter into with Internet Service Providers (ISPs). Some schools choose to become ISPs themselves or join collaborations in which they can purchase bandwidth collectively to save even more. 

According to Joe Forelock, the district’s assistant superintendent for academic and student services, “This is a long-term investment for the health of the district over the next many, many years.” Once the network is in place, it will cost approximately $36,720 annually to maintain it, which is 89 percent less than what Comcast plans to charge LOSD for the 2016 - 2017 school year. 

We want to note that Comcast tripled their rates from the 2015 - 16 school year, in part because the 2016 - 17 contract was only for a year while the dark fiber network is being constructed. With no competition in the region, Comcast has broad practical authority to decide what LOSD will pay. “Right now, Comcast is essentially the only game in town in many communities," Morelock says, "including LO."

Clackamus County will install the $1.54 million network; 40 percent of the total cost will be reimbursed through E-rate, the federal program for schools that pays for Internet access and certain infrastructure expenses.

“After six years, if costs remain the same and do not increase, or decrease for that matter, the district will save $181,000 per year in connectivity costs with the E-rate discount, or $301,000 per year if E-rate were to disappear,” Morelock says.

Connecting In Clackamus

Other community anchor institutions (CAIs) in Clackamus County have been connecting to the Clackamus Broadband eXchange (CBX). The CBX is the middle mile dark fiber-optic network that runs through the county, which was funded in 2010 with American Recovery and Reinvestment Act (ARRA) funding. 

Duke Dexter, broadband program coordinator for Clackamas County spoke with the Lake Oswego Review

Dexter says there was no obligation for any district or agency to join the network, but people want to travel the Internet more quickly, he says, and fiber-optic cables offer a faster link to the information superhighway.

“We built … a freeway," Dexter says, "and now, other people are building on-ramps to be able to get onto that freeway.”

I-Net Beginning to Blossom in Greenfield, WI

Greenfield city officials and school administrators recently agreed to cooperatively build a fiber-optic institutional network (I-Net). The Milwaukee suburb of about 37,000 expects to trim thousands of dollars from its annual network bill and bring its students, teachers, and local government up to speed.

Dig Now, Save Now

Just like many communities across the U.S., Greenfield realized that it was paying too much to connect its community anchor institutions (CAIs) to the Internet. In April 2015, Greenfield school district approved a bandwidth upgrade with a private provider that would cost the schools $45,588 annually. Within half a year, they had already hit their new bandwidth limit. In November 2015, they needed to upgrade again to the tune of $119,141 per year. 

With classrooms and public institutions demanding increasingly higher bandwidth, local officials decided to ditch the incumbent providers to build a fast, affordable, reliable network in the coming semester. Their investment will allow them to make long-term budgeting decisions, direct more money toward classroom expenses, and use technology to offer rich educational experiences. 

Construction started in June on the fiber-optic network that will connect Greenfield school district, neighboring Whitnall school district, Alverno College, and Greenfield public safety buildings. With installation slated to finish by summer’s end, local institutions expect immediate savings. 

Financial Terms

The City of Greenfield, Greenfield School District, and Whitnall School District all applied for state trust fund loans through the Board of Commissioners of Public Lands of Wisconsin (BCPL). 

Michael Neitzke, Greenfield’s mayor, expects the town to repay it share - a $700,000 loan from BCPL - within 10 years thanks to annual telecommunications savings. The school districts anticipate even shorter repayment periods. Officials at Greenfield School District expect to pay off their loan within 4 years, according to Superintendent Lisa Elliot.  The School District of Whitnall authorized a $440,000 loan from BCPL with a 5-year repayment term at an interest rate of 2.5 percent. 

More Than Just Money

Greenfield hopes its network will impact the community beyond the balance sheet. In addition to blazing fast download speeds, fiber-optic networks feature faster upload speeds that shorten data transfer times, opening the door to a variety of indirect benefits for public safety and education. Greenfield Now quoted Nietzke, who said: 

“Benefiting most in local government are police and paramedics... Police especially depend heavily on getting data and lots of it. Based on the increasing need of law enforcement, an upgrade of this kind would have been made, anyway.”

The school districts are also excited for new possibilities. Greenfield and Whitnall will consider sharing the costs of virtual classrooms, where students in either district could attend classes via the Internet. Their partnership with the city will allow the school districts to save substantially on telecommunications costs; school officials can direct funds toward educating students, maintaining infrastructure, or other important necessities.

Ottawa, Kansas, and Monticello, Illinois, are two other communities where schools and local government have teamed up to save public dollars while simultaneously obtaining better connectivity. Schools can use federal E-rate funds to pay for the cost of Internet infrastructure investment, reducing the overall cost for deployment. Money saved by lowering telecommunications costs can later be re-invested. When a city strategically locates fiber-optic rings, they can later expand their network to serve other CAIs, businesses, or residents.

Regardless of how far Greenfield eventually takes their network, these first steps will result in significant cost reduction and a valuable publicly owned asset.

Education Week Shines Light on Rural Schools' Plight

A recent series of in-depth articles from Education Week brings to light a persistent aspect of the digital divide: the lack of fast, affordable, reliable connectivity in rural schools. Throughout the country, schools struggle to pay exorbitant fees for aging copper networks. Teachers and students are cut off from digital learning opportunities as whole regions fall farther behind. Education Week brings these issues to the forefront - and community-owned institutional networks could be the answer.

The Education Week articles describes the harsh impact of these grim statistics. The nonprofit EducationSuperHighway found that for rural schools, the median price for connectivity is more than double that of urban or even suburban schools. Although the number of students without access to sufficient bandwidth has been cut in half since 2013, at least 21 million students do not have access to adequate connections. 

In extremely rural communities, large service providers do not have an incentive to build high-speed networks, and small private providers often cannot take on those high upfront costs. This leaves communities with no choice, but to pay skyrocketing rates for slow, unreliable Internet access over aging infrastructure.

East and West: Students Face Similar Challenges

The articles present two compelling case studies of Calhoun County, Mississippi, and Catron County, New Mexico, to tell the story of how high-speed connectivity is so often out-of-reach for rural schools.

Two schools in sparsely-populated western New Mexico split 22 Megabits per second (Mbps) of bandwidth for $3,700 per month. An increase to 50 Mbps wouldn’t require  new fiber, but the upgrade would cost an extra $1,003.47 each month. The local provider has a de facto monopoly in the region so the schools have no choice but to pay the going rate; with no competition they have no leverage for negotiating. According to the New Mexico Public School Facilities Authority, monthly rates range from $1.35 to $3,780 for each Mbps of speed across the state.

In Calhoun County, the district is even worse off: 2,500 students share a 3 Mbps connection on a T1 copper line. Students can’t take state-mandated online tests or even perform online research. Teachers can’t access media or lesson plans, let alone enter attendance. For this nonfunctional connection, the district paid $9,275 each month.

After class, 17 year old Clemmie Jean Weddle describes her growing anxiety. She’s worried about falling behind students at neighboring schools, with whom she will soon be competing for a slot at Mississippi State University.

“I had those 15 pages, and they had the Internet at their fingertips,” she says.

In addition to losing out because Clemmie and her classmates didn't learn how to use the Internet for research, a significant amount of public dollars was spent inefficiently on poor quality telecommunications. With better, more affordable options, Clemmie's school could have redirected those same dollars toward classroom learning needs.

According to the Consortium for School Networking, more than half of rural districts reported that only one Internet provider operates in their area - which means no competition and high-prices. Now, the FCC is overhauling the E-rate program to empower schools to build their own networks. 

Community-Owned Networks: A Possible Solution

At MuniNetworks, we have collected stories on our Community Anchor Institutions page to draw attention to the ways local community networks save public dollars and bridge the urban/rural digital divide.

For instance, the schools in Ottawa, Kansas, save $3,000 a month for twice as much bandwidth they used to get. In Carroll County, Maryland, the school district saves $400,000 annually. In rural northern Georgia, schools have real-time virtual music collaborations; schools have live interactive science demonstrations online in rural southwest Georgia. These savings and opportunities would have been difficult, if not impossible, without community-owned networks.

Rural communities often do not have a large tax-base to draw upon to support school levies to afford the exorbitant rates that private carriers charge each year. But a community network is an investment that sometimes provides an opportunity to later expand from schools and other public buildings to bring connectivity to homes and businesses.

Improvement Is Not That Far Away

In the Education Week articles, the E-rate changes empowered Calhoun County, Mississippi. In February 2015, the county requested bids from private providers to either offer faster, cheaper service or to build a network the district could own or lease for itself. The possibility of competition - the possibility of a community network - the incumbent provider offered 1 Gbps for $600 a month per school building. The threat alone was enough to get better rates.

Image courtesy of Chris Carey, Pics for Learning.

Connected Communities in an Age of Digital Learning: Webcast Archive Available

On February 27, the New America Foundation presented the live webcast, "Connected Communities in an Age of Digital Learning: A Vision for a 21st Century E-rate Program."

The webcast addressing the modernization of the E-rate program is now archived and available to view.

As technology advances, schools must find ways to keep up. At the root of their success is connectivity in the communities. From the announcement:

Yet many communities lack robust Internet connectivity, which is a key prerequisite to using these tools. Libraries and schools across the country report that they do not have the necessary speeds and equipment to support the digital learning environments of today, let alone tomorrow. Sustaining and upgrading the Internet infrastructure that supports these community anchor institutions is critical. And in addition to physical infrastructure, these communities need investments in social infrastructure: support systems in and around community institutions that help facilitate digital literacy, support broadband access, and encourage meaningful broadband adoption. 

The panel included experts in education, library science, and technology. Featured speakers were:

See video

In California, Tough Economic Times Led Shafter To Adjust Network Plan

In the 1990s, the community of Shafter, California, began developing its strategic plan; the move would eventually lead them to build a municipal broadband network. The town of 17,000 still depended primarily on agriculture but manufacturers were relocating to the community, drawn by its proximity to the railroad and its open space. Potential employers increasingly focused on broadband access as a priority and Shafter realized broadband would be critical to continued growth.

Shafter’s Assistant City Manager Scott Hurlbert recently explained to us how the community built its own fiber network to serve commercial clients, local government, and schools. This incremental approach is not unique but Shafter has no municipal electric nor gas utility, which does puts it in the company of Santa Monica, Mount Vernon, and a few other communities that have built networks without having a municipal power company.

Shafter’s City Council examined its strengths and its weaknesses and found a way to build a network with no borrowing or bonding. The community continues to expand its fiber network, attracting businesses and improving quality of life in this central California town.

In the 1990s AT&T was the main business services provider and it would only improve business telecommunications on an order-by-order basis. Companies that wanted to build beyond the developed town had to pay for the installation themselves, often waiting months to get connected. Prices were "obscene" and the delays almost killed several commercial deals. Even today AT&T takes the same approach in Shafter.

When he joined the City in 2005 as the IT Director, Hurlbert and his staff researched wireless technologies but determined that fiber-optic deployment would be the best option. At that time, the bandwidth demand was already intense and a wireless network would need fiber for backhaul. Hurlbert and staff also investigated other communities, including Chelan, Washington, to look for workable models.

In 2006, three master planned residential subdivisions were approved for expansion of the City of Shafter. The city saw this as an opportunity to start a large-scale FTTH network to serve both business and homes. They developed a triple play model, planning to connect to each of the 11,000 future homes. The city would use revenue from the FTTH network to expand out to surrounding areas for more industrial customers and build a new network for government, schools, and public safety. But when faced with a troubled economy in 2008, plans for the subdivisions evaporated and the FTTH plan was also put on hold.

The community decided to adjust course with a focus on economic development, improving municipal connectivity, and improving public safety. “Jobs, education, safety” became the new mantra. “It’s a cycle,” Hurlbert says, “and if you break that chain the whole thing starts to fall apart.” Community leaders wanted to create a broadband network to draw in more local businesses, serve students, and generate public savings.

Shafter City Seal

At the time the City spent $6,000 per month for six T1 connections. In 2006, Shafter asked AT&T for a quote to connect City Hall to a nearby correctional facility. The relatively small fiber upgrade would have cost $140,000 to build and up to $5,000 per month to lease for a 100 Mbps connection. Rather than depend on AT&T, Shafter decided it was time to start investing in community fiber infrastructure. Budgeting would be predictable and the City would control a network that would provide more capacity.

With less than $200,000 from the general fund, Shafter built fiber connections to city government offices, police offices, the county library, volunteer fire department facilities, the veterans’ hall, the county court house, a local youth center, school district facilities, and a fiber-to-fiber connection with the county sheriff's private network. The city also connected the correctional facility that is now no longer in use. From the day they lit the network, they have never experienced a failure. The existing fiber network consists of four miles in the city core and provides 10 gigabit capacity between its municipal facilities.

Prior to the connecting to the network, the school district used a T1 connection for its main campus and wireless connections to a second campus. Hurlbert tells us that the county superintendent provided multimedia courseware and the T1 lines were sufficient, but the wireless connection did not support it. A large segment of the student body could not access the material, putting any Shafter students behind the learning curve.

Hurlbert established E-rate provider status for the city, and now supplies a dark fiber connection for the school at a $1,000 per month. Shafter’s school district qualifies for a 90% E-rate reimbursement, so the school district actually pays $1,200 per year for 1 gigabit connectivity between facilities. Hurlbert says the city recouped the cost of the expansion in three years and increased the network’s footprint for future expansion.

The City later received a grant from Homeland Security to build a communications tower, which connects to the network. Security cameras on the tower have prevented theft and documented criminal activity at a relatively remote industrial campus. The next phase for the network will include increased public safety applications such as traffic light control and more cameras in industrial areas. 

Shafter has not abandoned its dream of an extensive FTTH network. Hurlbert tells us they have a "guinea pig" subdivision where the developer installed conduit to each property. As the network continues to grow, he sees the "jobs, security, education" chain expanding along with it. Hurlbert says a patient community willing to stick to its long-term vision is critical for success. 

Joanne Hovis on Business Plans for Municipal Fiber

Joanne Hovis, President of CTC Technology and Energy, recently published a must-read article in Broadband Properties Magazine. Whether you are a community leader investigating the possibility of a publicly owned network or an engaged citizen looking for pros and cons, this piece explains practical benefits succinctly. In her article, The Business Case For Government Fiber Networks [PDF], Hovis looks at life beyond stimulus funding. She points out how we should evaluate municipal networks in an environment where shareholder profit is not the first consideration.

Hovis gives a brief history of how local communities reached this point of need. As many of our readers know, local communities used to be able to negotiate with cable providers for franchise opportunities and rights-of-way. Often cable providers would construct broadband infrastructure in exchange for a franchise to operate in a given community, creating I-Nets for local government, schools and libraries. Once states inserted themselves into the process with state-wide franchising, local negotiating power evaporated. Many of those franchise agreements are ending and local leaders are considering municipal fiber optic networks.

Hovis stresses that municipalities do not function in the same environment as the private sector. While they still have a fiscal responsibility to their shareholders (the taxpayers) the main function is providing public safety, encouraging economic development, offering education, and using tax dollars to better the quality of life. Hovis describes how redefining return on investment (ROI) needs to go beyond the balance sheet bottom line. 

These benefits have nothing to do 
with traditional financial measures. Rather, they represent the return 
to the community in terms of such largely intangible societal benefits 
as enhancing health care quality, narrowing the digital divide, providing enhanced educational opportunities to school children, delivering job search and placement opportunities at public computer centers and helping isolated senior citizens make virtual social connections.


Even without the intangible benefits, Hovis argues the financial benefits to local communities cannot be ignored:

First, a government network can help avoid existing and future costs by replacing services for which the government previously paid third parties. Second, a network can bring revenues to a community, especially given new E-Rate regulations that make government networks eligible for subsidy if they serve schools and libraries. Together, these cost savings and revenue streams can add up to significant dollars – potentially to amounts that justify financing the necessary construction.

Hovis explains the economics of government need to lease circuits, an extremely lucrative practice for phone companies or providers. In addition to being expensive, Hovis notes they are often low-bandwidth. Hovis takes it one step further:

Build the network and you will shave this amount from your accounts payable.

In fact, because a government network can deliver far higher-capacity connectivity than the jurisdiction
 had previously leased, its value is even greater than simple cost avoidance. 
A government that owns a network 
can use inexpensive, off-the-shelf equipment to connect its facilities to one another at no cost for bandwidth (because the traffic is “on network”
 and not going out to the Internet). It can also deliver Internet connections to these facilities at a per-unit cost much lower than that of leased connections because it can aggregate the needs of all departments and purchase commodity bandwidth. This is particularly true for a jurisdiction that can develop a mutually beneficial partnership with a provider of wholesale bandwidth.

Considering the fact that capacity needs continue to grow, savings with a publicly owned next-generation network increase exponentially. Eliminating the need to lease now eliminates the need to lease more later.

Hovis also examines in detail the different ways municipal networks can provide revenue. She examines:

  • Dark or lit fiber to community anchor institutes (CAIs): We have documented hundreds of communities that lease dark fiber to CAIs and also to commercial customers. That list continues to grow.
  • Middle Mile Capacity: Providing infrastructure to private ISPs is more speculative, but encourages economic growth and provides connectivity to businesses and individuals who would not otherwise have it.
  • E-Rate Subsidies: As of September 2010, nonprofit and public networks are eligible for E-rate subsidies for providing broadband to schools and libraries. This potential source can contribute toward network self-sustainability.

The article also stresses one of the factors we find most compelling when considering investment in publicly owned networks - keeping local money in the local economy:

Circuits leased from a large national provider require the delivery of a big monthly check to a potentially far- away corporate entity, but monthly fees paid to a government-owned network stay in the community to be spent on other government services and to be multiplied when network employees go out to eat or spend money at other local businesses.

The concept of planning, financing, and building a municipal network is daunting to many communities; it should be a unique local decision. Few people have experience like Hovis, who does an excellent job of laying out critical considerations.

FCC Survey: 80% of Schools/Libraries Have Insufficient Broadband Connections

The Federal Communications Commission released the results of a survey of libraries and schools, the 2010 E-Rate Program and Broadband Usage Survey - announcement here [pdf] and full report here [pdf].

As critical as we are of the FCC, I would like to note that the FCC is doing a better job of collecting data than it did in the past.

I want to highlight a few interesting pieces from the report. Of the respondents, only 21% of schools and 13% of libraries have connections riding on fiber-optics. Half of schools and libraries are stuck on T1 lines.

Schools and libraries reported 63% and 65%, respectively, connections that were under 10Mbps. Considering these connections are likely serving many concurrent connections, they should have faster connections.

The vast majority want to have faster connections:

FCC Chart of those desiring faster connections

The question is why they want faster connections. Only 20% say their current connection completely meets their need to conduct online testing and assessment applications - with another 44% saying it "mostly" meets those needs.


These gaps represent a tremendous opportunity for growth - communities should be building their own fiber-optic connections to connect these key institutions and ensure they will have affordable, fast, and reliable connections well into the future. By owning the network, these institutions will have greater control over future costs and their capacity to take advantage of even newer applications.

The FCC should favor locally owned networks to encourage self-reliance instead of never-ending subsidies to private carriers who have little incentive to lower prices and increase investment.

Broadband for Libraries and Schools

Following up on my previous post "Institutional Networks and Cherry Picking," I want to briefly note that the U.S. should reform how it funds Internet connections at schools and libraries.

Let me start with an assumption: we do not want to use federal taxes to support these local institutions except where most necessary. It strikes me that wherever possible, communities should take responsibility for their own community institutions.

With that in mind, the eRate program concerns me. Basically, eRate is a means for the federal government to aid local schools and libraries in affording broadband. I'm afraid that it indirectly encourages monopolistic service providers (mainly telephone incumbents) to overcharge for T-1 lines while removing any incentive for the school or library to invest in a better connection.

If a school or library is only paying 20% of the cost of a slow and overpriced line, it has considerably less motivation to seek a better connection -- especially as the only alternative to an existing connection may be building new fiber paths - as noted in "Libraries dying for bandwidth."

But another problem is simple availability. As the ALA's report (PDF) points out, "moving from a 56Kbps circuit to 1.5Mbps is one thing. Moving from 1.5Mbps to 20Mbps or to 100Mbps or even to a gigabit—depending on the size and need of the library—is another." Even when they can pay for it, many libraries are finding that higher speeds simply aren't available.

This program has been around since 1998 and has paid out $25 billion. Imagine if the program had encouraged the schools and libraries to build their own networks from the start - a truly sustainable approach rather than an approach that brought slow broadband to these anchor institutions while rewarding telephone companies significantly overcharging for slow services.

Consider Joanne Hovis of Columbia Telecommunications Company -

In Montgomery County schools connected to a community-owned fiber network are getting access to 100Mbps speeds and paying $71 per Mbps per month, whereas neighboring schools not on the network are paying $2,000 a month for T1 service at 1.54Mbps, and that price is subsidized by matching e-rate funds of an additional $2,000 a month.[quoted by]

This is not to say eRate is a total failure because without it, many schools and libraries would not have been able to offer the services they do. Additionally, some smart communities have used eRate the help build publicly owned networks - as in Danville, Virginia, where the publicly owned utility successfully bid for contracts to the schools under eRate programs. But eRate should go further in encouraging these innovative and sustainable solutions rather than continuing to pay for connections that will only increase in price -- a rather unsustainable approach.

Many of these networks will be able to pay for the operating costs but they need assistance in being established. Thus, a smart program would push communities in the direction of local self-reliance rather than enabling endless, expensive dependence on companies that have little incentive to improve connectivity.

Federal programs should prioritize public ownership, if for no other reason than it pushes funding recipients to become responsible for the solution. Requiring responsibility encourages sustainable solutions, rather than defaulting to a lousy status quo.

Photo Courtesy of Christopher Chan on Flickr, used under creative commons license.