Schools, Health and Libraries Broadband Coalition (SHLB) takes a look at the economics of discontinuing (or reducing) E-Rate programming, which pays for a considerable amount of broadband connectivity in schools and libraries…

The Federal Communications Commission is considering eliminating or significantly reducing E Rate support ($2.6 billion in 2025) for broadband connectivity and related services provided to schools and libraries. While eliminating the program would reduce Universal Service Fund expenditures, it would also increase the effective cost of broadband services for public and private K-12 schools and libraries that increasingly rely on digital connectivity to support teaching, learning, school operations and security, cybersecurity, internal and external communications, and access to online educational and informational resources. Nearly every critical function in schools and libraries now relies on the network, including door locks and access controls, security cameras, bus scheduling and transportation systems, cafeteria
payment systems, payroll, student information systems, attendance and grading platforms, and communications with students, staff, and families. Because broadband has become an essential educational input rather than a discretionary expenditure, schools and libraries cannot simply replace connectivity with teachers, books, buildings, or other educational resources. Paying more for connectivity therefore leaves less money available for the other goods and services needed to provide education and library services.
We use Brattle’s BEYOND computable general equilibrium (“CGE”) model to estimate the economy-wide contribution of E-Rate. Our primary counterfactual eliminates the program while recognizing that broadband and internal network infrastructure remain necessary inputs. The results indicate that 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. Thus, each dollar of E-Rate support is associated with approximately $1.60 in GDP. The measured economic loss exceeds the amount of federal support removed because without E-Rate, 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.
Eliminating just support for connectivity infrastructure (Category 2), including routers, switches, Wi-Fi access points, cabling, managed internal broadband, and related infrastructure needed to distribute connectivity within schools and libraries, would also have substantial effects.
Eliminating Category 2 alone (approximately $1.2 billion in annual support) produces an estimated $2.5 billion decline in GDP, $1.6 billion reduction in real wages, and $0.9 billion reduction in tax revenues.
Finally, we find that even unsubstantiated concerns about waste, fraud, inefficient procurement, or otherwise unproductive expenditures do not materially change these
conclusions. Even under a deliberately conservative assumption that 2.5% of E-Rate support generates no intended economic benefit given that the improper payment level has already been found to be lower than 1.5%,1 the associated GDP loss is approximately $113.9 million, or
only about 2.7% of the GDP loss from eliminating E-Rate altogether. The results demonstrate that eliminating a productive program to prevent a comparatively small amount of ineffective spending can impose economic costs substantially greater than the inefficiency being addressed.
The FCC’s review should therefore distinguish between monetary savings and economic benefits.