Association for Public Policy Analysis & Management

Policymakers have long advocated for improving Internet access in schools to reduce the digital divide between high- and low-income students and urban and rural students. Since 1996, the Federal Communication Commission’s (FCC) E-Rate program has provided schools with annual subsides totaling $2.4 billion to improve Internet connectivity. The E-Rate program subsidizes external connectivity costs (“Category 1” funding covering service fees for accessing high-speed broadband networks) and internal connectivity costs (“Category 2” funding for internal roaming and wiring to share Internet access within buildings). E-Rate subsidies cover a higher proportion of connectivity costs for rural (versus urban) schools and for schools serving higher proportions of socioeconomically-disadvantaged students. Category 1 applications are funded first followed next by Category 2 applications.

Due to growing demand for these subsidies, the E-Rate program experienced a shortage in funds that resulted in the denial of many Category 1 applications and the rejection of all Category 2 applications for the 2013-14 and 2014-15 school years. Following a complete overhaul of the program, the FCC increased its annual E-Rate funding to $3.9 billion for the 2015-16 school year onward, setting aside $1 billion of this funding for Category 2 applications. The FCC also included new provisions in the E-Rate program to help isolated rural schools successfully apply for Category 1 funding, a state matching component to finance school expenditures on Internet connectivity, and price transparency mechanisms to reduce charges from Internet service providers. While policymakers have lauded these changes for bringing the Internet to hard-to-reach schools, little is known about which school districts are taking advantage of these new program features and how districts are using E-Rate subsidies to improve education. These are important questions given that low-income and rural districts have struggled to receive E-rate funding in the past and cash-strapped districts are struggling to invest in Internet connectivity alongside complementary inputs for digital learning, including software, curriculum materials, and teacher professional development.

Using California data on E-Rate funding and district demographics and expenditures from 2009-10 to 2015-16, I run district and year fixed-effect models to examine differential trends in district access to Category 1 and 2 subsidies and how these subsidies are associated with district expenditures on technology and instruction. California is one of the most active states in the E-Rate program, receiving 15% of total program funds. It is also a national leader in education technology and one of the lowest per-pupil funders for public education, making districts elastic in their demand for digital learning based on the availability of subsidies to lower Internet connectivity costs. California also collects detailed records of district expenditures, making it possible to match district revenues from E-Rate subsidies with relevant expenditures on instruction and capital outlays. I analyze these data to demonstrate whether the E-Rate program is achieving its goals of providing equitable Internet access, whether E-Rate subsidies are incentivizing schools to spend more on Internet connectivity and related technology inputs, and if this spending on technology is complementing or crowding out district expenditures on other instructional inputs.