1. TheTimeisNowforK-12toUpgrade
CommunicationsSolutions
E-rate subsidies for VoIP are gradually phasing out, but if districts act now, they can
reap the benefits of a modern and scalable voice infrastructure.
Issue Brief
E-rate Phasing Out Phone Services:
What You Need to Know
Since 1997, the federal government has subsidized
communications connectivity services for phone and Internet
in K-12 schools and libraries, providing discounts of 20 to 90
percent based on financial need. The program, called E-rate,
is funded by a tax on phone bills and administered by the
Federal Communications Commission (FCC). Until recently,
both phone and Internet connectivity services were generally
covered, with a program budget of $2.3 billion annually,
adjusted for inflation.
But in summer 2014, the FCC enacted a sweeping reform
of E-rate — a modernization aimed at boosting districts’
access to high-speed broadband and wireless connections.
In November 2014, the FCC voted to raise the amount E-rate
could disburse to $3.9 billion.
One way to help pay for this — besides hiking the E-rate tax
— was eliminating or phasing out telephony services. The FCC
changed Priority 1 and Priority 2 services to Category 1 and
Category 2, and ruled that services like dial-tone, long-distance
calling and voicemail would no longer receive funding, starting
immediately. Other voice services, including interconnected Voice
over Internet Protocol (VoIP), which had previously been recognized
as an eligible Priority 1 expense, were set for a five-year phase-out.
As a result, beginning in funding year 2015, the amount of
discount available for eligible schools and libraries for VoIP-related
services is being cut by 20 percent. It will be cut by 20 percent
every year thereafter before it’s eliminated entirely in 2019.
How this will affect individual school districts and library systems
depends on those institutions’ discount levels. Discounts are
awarded based on the percentage of students in a district qualifying
for the National School Lunch Program (free and reduced lunch).
Rural districts also receive a slightly higher discount than urban
districts, reflecting their lack of access to broadband technology.
Discount amounts range from 20 percent to 90 percent.
For a district or library system only qualifying for a 20
percent discount, the reimbursement for VoIP or any telephony
services has essentially ended. However, a district or library
that qualifies for a 90 percent discount can still receive a 70
percent discount in 2015, 50 percent in 2016, 30 percent
in 2017 and 10 percent in 2018. Similarly, an institution
qualifying for an 80 percent discount would receive 60 percent
in 2015, 40 percent in 2016, 20 percent in 2017 and so on.
For these districts and libraries, the window of opportunity
still exists to receive significant government subsidy for VoIP
or other telephony services. But the window is closing soon.
School districts and libraries need to keep the gradually
receding amount of government funds in mind as they plan
their voice services upgrades — upgrades that can bring cost
savings and many other advantages.
Benefits of Upgrading to Hosted,
Cloud-Based VoIP
Prior to 2012, Maricopa Unified School District near
Phoenix, Ariz., used a premises-based VoIP solution for its
telecommunications, call management and voicemail. But this
solution was creating headaches.
One problem: The service was complicated and difficult
to configure. Changes required on-site visits from technicians.
Maintenance was costly due to system updates and
configuration that required certified technician support. The
premises-based system was also only eligible for Priority 2
In funding year 2015, the amount of discount available for
eligible schools and libraries for VoIP-related services is
being cut by 20 percent. It will be cut by 20 percent every
year thereafter before it’s eliminated entirely in 2019.
2015
2016
2017
2018
2019
VoIP-related
services are
being cut by
20%every year
