E-Rate for Both Categories 1 and 2 To Be Fully Funded in the 2018 Funding Year

On August 17, 2018, the FCC’s Wireline Competition Bureau announced that once again, there will be sufficient funding to meet applicant demand for both Category 1 services (such as broadband services) and Category 2 equipment and services (such as managed Wi-Fi and equipment) for the 2018 funding year, which began on July 1, 2018.

The total demand for the funding year is estimated to be $2.7 billion—well below the $4 billion cap for funding year 2018. There also remains $1.2 billion in unused funds from prior years, which will likely continue to be rolled over to subsequent years given the projected demand for this year. Demand for funding for schools to construct and operate their own networks through the deployment of dark fiber has been much lower than what was anticipated by the FCC. This was not necessarily a surprise to those in the industry, however, who understood that schools and libraries were not necessarily equipped to manage complex communications networks.

What was not widely anticipated when the FCC adopted the second E-rate modernization order in 2014, is that the demand for Category 2 funding has turned out to be relatively low and it has declined over time. USAC has estimated that most of the demand for funding year 2018, or just over $2 billion, is for Category 1 services, compared to only $745 million for Category 2. Given that Category 2 includes managed Wi-Fi services, there were concerns in 2014 that the introduction of funding for such services would outstrip program resources. Yet requests for Category 1 requests have consistently exceeded those for Category 2 funding since the order was adopted, with the total Category 2 requests declining each year.