American Enterprise Institute

E-Rate is the forgotten child of the universal service family. While commentators and Congress have spilled significant ink examining the government’s broadband build-out and affordability initiatives, E-Rate has been quietly subsidizing broadband service to schools and libraries for a quarter century. Promoting community connectivity and education is a worthwhile policy goal.

The Universal Service Fund is funded  by a quarterly surcharge on interstate and international telecommunications revenue. Each quarter, a private nonprofit known as the Universal Service Administrative Company (USAC) estimates how much money it needs to fund the Federal Communications Commission’s (FCC) myriad universal service initiatives. It also estimates the amount of telecommunications revenue expected to be generated by industry, and from there calculates the surcharge percentage necessary to cover program costs.

Reducing the broadband affordability gap is an important and noble goal. Unfortunately, it is far from clear whether Lifeline, the federal program tasked with getting low-income households online, actually addresses this problem. For over a decade, academics, government watchdogs, and independent auditors have criticized the Federal Communications Commission’s inability or unwillingness to measure the program’s effectiveness—while private studies suggest much of this spending may be misdirected toward families at no risk of losing internet access.

Back in 1996, Congress amended the Communications Act to include antidiscrimination as part of American telecommunications policy.