The FCC announced this week that they will be providing an additional $750 million in the E-Rate program to promote high speed broadband to schools. This was mentioned in President Obama’s State of the Union address. And this is a follow-up to the announcement last year that the administration wants all schools to have access to 100 Mbps by 2015 and access to a gigabit by the end of the decade.

I want clarify that this does not increase the size of the Schools and Library Fund that is part of the Universal Service Fund. That fund is still at $2.4 billion per year and will stay at that level of funding. So this announcement, while sounding like a big increase, is really a reallocation of the existing fund.

More of the fund will help to pay for fast internet connections, but that means other things will no longer be funded. Many who are getting reimbursed from this fund today for older technologies are going to see their payments decrease or cease. Today this fund pays for a lot of old technologies, and so funding for things like voice lines, dial-up connections for faxes, paging services, and email programs will be eliminated or severely curtailed. For every school who gets more funding there will be another that gets less and this is a zero sum game.

For those who don’t follow this program, let me give you a short primer in how it work. Schools receive funding based upon the percentage of their students who are eligible for the school lunch program. Schools with the highest percentages of school lunches will get some or all of their communications costs for the schools covered by the fund. The lower the percentage of school lunch students, the smaller the amount that the fund will pay, as a percentage of the bill. The funds are awarded from neediest downward until all of the funds for a year are allocated.

The funds pay for a variety of different costs, and one assumes that the menu of things that can be compensated from the plan is going to change with this announcement. But today the fund will not only cover some monthly recurring costs, such as for an Internet connection, but it will pay for one-time costs like wiring a school for Internet.

Every school who gets funding must have an ISP partner who provides the services. Let’s use an example of a school that gets a 60% reimbursement to show how this works. The ISP will sell services to the school at competitive rates. In most places the ISPs are picked using state purchasing laws requiring the low cost bidder to win the job. The school will pay the ISP its unfunded percentage of the bill, in this case 40%. The ISP must be registered with the USF fund to get paid, and they would bill the fund for the remaining 60%. This means that the ISP gets full payment, but that the school in this example saved 60% on their bill.

One has to imagine that the fund is now going to have some sort of incentive to reimburse schools for connections that are at least 100 Mbps download. Connections that are slower than that are going to have to somehow be given a lower rating for the fund to help foster the goal of faster Internet.

I worry a bit in that revising the rules to promote fast Internet might inadvertently disadvantage those schools with the slowest Internet. There are schools that happen to be located in a broadband desert who have no access to fiber, and those schools might lose compensation that helps them to pay for the fastest speed they can get.

Many ISPs already take part in this program. But if you are in a position to sell a high-speed connection to a school or library you should get registered with the USF fund. It’s fairly easy to do and CCG can help you with the paperwork. This program is run well and ISPs report no problems getting reimbursed. There is no reason for ISPs and school partners who qualify to not get help from this fund.