Eliminating E-Rate would cut US GDP by $4.2B – study

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Eliminating the E-Rate program would be harmful to the US economy, to the tune of $4.2 billion per year, says a recent study from the Brattle Group, commissioned by the Schools, Health & Libraries Broadband (SHLB) Coalition.

SHLB shared those results with the FCC in comments last week on the Commission's proceeding to consider changing or eliminating the E-Rate program, which provides low-income telecom subsidies for schools and libraries. The FCC officially opened its notice of proposed rulemaking (NPRM) on the matter in August, proposing changes to the subsidy program and posing questions about its future, including whether it should be eliminated entirely.

That possibility has resulted in a raft of schools and libraries throughout the country imploring the FCC to preserve the program, which many educational institutions say is needed for their basic day-to-day functioning in a world where everything is connected to the Internet. Losing E-Rate would even result in school staff cuts, argue superintendents, as resources would need to be reallocated to pay for necessary telecom services currently funded with help from E-Rate.

Related:The Divide: SHLB's Joey Wender on the fight to save E-Rate

Now, the Brattle Group, through its study, has quantified the loss of E-Rate at $4.2 billion per year in lost GDP. The E-Rate program allocated approximately $2.6 billion in subsidies in 2025.

Measured loss exceeds cost of support

According to the Brattle Group's analysis, each dollar spent through the E-Rate program is "associated with approximately $1.60 in GDP." Hence, says the group, "eliminating approximately $2.6 billion in annual E-Rate support would reduce real GDP by approximately $4.2 billion annually, real wages by $2.8 billion, and tax revenues by approximately $1.5 billion."

That's because without the E-Rate program, adds the study, "schools and libraries must devote more of their own budgets to connectivity, leaving less available to support the overall level of education and library services. As school spending generates greater follow-on economic activity than broadband spending, institutions purchase fewer non-broadband goods and services from other suppliers and use less labor, and those reductions propagate through household income, spending, and tax revenues."

The study also looks at the impact if the FCC were to eliminate only E-Rate's "Category 2" spending – another option proposed in its NPRM. Category 2 support specifically finances the internal infrastructure for a school or library broadband connection, at roughly $1.2 billion/year.

Related:Small schools, libraries implore FCC not to take their telecom funding

The Brattle Group finds that cutting Category 2 funding would also produce "substantial" losses.

"Removing Category 2 support alone produces an estimated $2.5 billion annual GDP loss, $1.6 billion reduction in real wages, and $0.9 billion reduction in tax revenues. These losses are substantial relative to the roughly $1.2 billion of Category 2 support removed," states the study.

"Connectivity to a building has limited value if the institution lacks the internal network necessary to deliver that connectivity where students, teachers, staff, patrons and the buildings' countless systems actually use it," the study adds.

Questionable authority

In addition to the direct harm that eliminating E-Rate would have on schools, libraries and the economy at large, SHLB also devotes a section of its own comments to the FCC on challenging the Commission's authority to end E-Rate – a program established by Congress through section 254 of the 1996 Telecommunications Act.

That matters because it indicates the group may be preparing for a legal battle should the FCC move to sunset the program.

"The plain text of the statute shows that connecting schools and then sunsetting the program was clearly not Congress's objective," argues SHLB. "There is nothing in the text of the statute empowering the Commission to terminate the program, including (as the NPRM asks) after a certain period of time or after certain benchmarks are met. On the contrary, in the Telecommunications Act of 1996, Congress recognized that universal services would evolve over time, and required the Commission to ensure that the program keeps pace with those evolutions. ... Treating E-Rate as a finished project is like deciding to stop maintaining a highway because it has already been built."

Related:Losing E-Rate could cause school staff cuts, say superintendents

The FCC's NPRM also poses questions about limiting E-Rate support to certain geographic regions, or adjusting it based on educational outcomes, screen time limitations, among other restrictions, each of which SHLB argues is disallowed by statute.

"[T]here is no rational reading of section 254 that would allow the Commission to impose screen time limitations on student and library patrons," says SHLB.

Reply comments on the FCC's E-Rate proceeding are due on November 12.

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