E-Rate Funding Demand Continues to Surge in Excess of Cap; Denial of all 2014-15 Priority 2 Funding Requests Expected

Last week, the FCC announced that it would effectively increase the E-rate cap for the 2014-2015 funding year to $2.6 billion by allowing $200 million left over from prior years to be spent in the upcoming funding year.  The FCC indicated that it expected these funds to be sufficient for USAC to fund all committed Priority 1 services, but it does not appear that any funding will be left for Priority 2 services.  Many E-rate proponents hope that the FCC’s upcoming reform order will address this situation by increasing funding and/or reshuffling priorities so that, for example, wi-fi (an internal connection) could take priority over traditional voice services.  Prior to the last funding year, some applicants at the higher discount rates (most recently, only those eligible for the 90% discount) received funding.  However, in 2013-14 (for the first time ever), Priority 1 funding requests alone exceeded the total program cap of roughly $2.4 billion, leaving no funds left for Priority 2.