July 17, 2017

Technology in Schools: What Does $27 Billion in E-Rate Spending Accomplish?

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Many schools have been connected to the Internet during the last two decades, but no one knows how much of this progress can be credited to the Schools and Libraries program, created by the Federal Communications Commission (FCC) in 1996.  Researchers and lawmakers have criticized this inter-carrier subsidy program, commonly known as the E-rate program, for its distortionary financing,  fraud,  and lack of oversight.  This paper explores another shortcoming of the program: American consumers spend billions of dollars in fees annually for a school technology program that largely has not translated into student achievement gains.

In 1997, then US Secretary of Education Richard Riley stated that E-rate had to accomplish more than just wiring schools. The program “must show that it really makes a difference in the classroom, and that means helping students to learn the basics and other core subjects to high standards,” he argued.  Despite ballooning costs, E-rate has failed to show an appreciable effect on student achievement, and the program’s defenders quickly began to downplay earlier promises about student achievement. 

Despite E-rate’s mixed record, in 2014 the FCC unilaterally increased the program’s annual cap from $2.38 billion to $3.90 billion. We recommend rolling back this “ed-tech” subsidy program. Our recommendation stems from a recent Organisation for Economic Co-operation and Development (OECD) report, which reached the following conclusion after finding few positive effects of technology in classrooms:

Put simply, ensuring that every child attains a baseline level of proficiency in reading and mathematics seems to do more to create equal opportunities in a digital world than can be achieved by expanding or subsidising access to high-tech devices and services. 

Absent congressional action, consumers will be on the hook to spend tens of billions of dollars more in fees for this program. 

Background: The Funding Evolution

The Telecommunications Act of 1996 added a statutory objective for the FCC to provide “advanced telecommunications services” to schools and libraries as part of the Universal Service Fund (USF), a new telecommunications subsidy program.  The E-rate subsidies range from a 20 percent discount to a 90 percent discount on eligible telecommunications expenses, depending on the school’s share of students who qualify for the National School Lunch Program.

Today, the FCC permits the telecommunications industry to raise $3.9 billion annually from phone customers and to redistribute those funds among companies, via the Universal Service Administrative Company (USAC),  to hook up schools and libraries.  USF fees are determined by the FCC based on USAC’s projections of financial needs to fund the USF programs. 

US Phone Customers’ Tab to Fund E-Rate Will Soar

From 2000 to 2014, US phone customers paid $26.9 billion in surcharges to fund E-rate disbursements, according to USAC data. This is about 79 percent of the FCC-set cap, which totaled $34.1 billion.  

Drafters of the USF in the House and Senate, as well as the Congressional Budget Office (CBO), expected the cost of USF programs to decrease over time.  Despite this expectation, in 2014 the FCC voted to raise E-rate’s disbursement cap from $2.38 billion to $3.90 billion, as shown in figure 1. If current trends hold, telephone and broadband customers will pay between $39 billion and $53 billion over the next 15 years to fund the E-rate program. 

Classroom Technology Rarely Leads To Achievement Gains

It is reasonable to infer that adding technology to classrooms improves student outcomes.  Anecdotes aside, however, results are mixed. Some researchers find small, positive effects on student performance,  but most research suggests negligible effects.  In a 2006 article about E-rate’s impact in California schools, University of Chicago economics professor Austan Goolsbee and Northwestern University economist Jonathan Guryan write that “at least in the short run, there is no evidence whatsoever that schools with E-rate subsidies learn over time how to use Internet technology in a way that improves test scores.”  Clemson University economics professor Thomas Hazlett and his coauthors likewise found in 2016 that E-rate dollars had no real effect on SAT scores in North Carolina. These findings are in line with research about ed-tech subsidies and student performance in Israel  and other countries around the world. In the most extensive international study to date, OECD researchers examined dozens of countries, standardized test scores, and technology use. After accounting for social background and demographics, the 2015 report found that the results . . . show no appreciable improvements in student achievement in reading, mathematics or science in the countries that had invested heavily in ICT [information and communication technology] for education. And perhaps the most disappointing finding of the report is that technology is of little help in bridging the skills divide between advantaged and disadvantaged students. Early proponents believed E-rate would improve educational measures,  but now E-rate advocates flatly reject incorporating educational outcomes in assessments of the program.  

Conclusion

As advocates and telecommunications vendors retreat from justifying E-rate for its educational benefits, lawmakers should examine whether the billions of dollars in telecommunications fees are justified. Based on current trends, consumers will pay more than $45 billion in telecommunications fees in the next 15 years to subsidize networks in schools and libraries, but they will see little improvement in student achievement. Other federal programs that incorporate technology in schools have less distortionary financing.  After 20 years, as OECD researchers suggest, it may be time for lawmakers to discontinue E-rate’s ed-tech subsidies and focus on improving education generally.