Terminating E-Rate would cost US economy over $4B annually, study says

Terminating the federal E-Rate broadband subsidy program for schools and libraries would cost the U.S. economy over $4 billion annually, according to a new study published by the Schools, Health & Libraries Broadband (SHLB) Coalition. 

The economic study, released by SHLB and other partner associations on Thursday, found that removing E-Rate’s $2.6 billion in annual support would reduce the U.S. real GDP by $4.2 billion. This translates to about $1.60 in lost economic activity for every $1 of support removed from the program that helps schools and libraries pay for internet connectivity and related services, the study found.

Additionally, eliminating support for E-Rate would also reduce real wages by about $2.8 billion and tax revenues by about $1.5 billion each year, the study found. It highlighted that the economic losses would exceed the amount of federal support withdrawn because higher connectivity costs would divert money away from other productive activities, creating ripple effects across suppliers, labor markets, household income, consumer spending and tax revenues.

The study comes as the Federal Communications Commission is reviewing E-Rate’s future while it continues to fund the program. In June, the commission released a notice of proposed rulemaking that sought comment on whether it should retain, narrow or eliminate the program, as well as potential changes to online safety requirements, parental control options and program oversight.  

Initial comments on the proposal are due Oct. 13, and reply comments are due Nov. 12. The proceeding has drawn significant interest from stakeholders, with more than 1,900 filings submitted as of this week. 

It also looked at what would happen if only certain parts of E-Rate were eliminated, rather than the entire program. The study found that just eliminating the $1.2 billion in support for schools’ and libraries’ internal Wi-Fi and networks would still result in a GDP reduced by roughly $2.5 billion.

The study also looked at which geographic regions would be most impacted by any cuts, finding that the South and West regions received the most E-Rate funding from 2021 through 2025. In total, the average annual funding across the regions was about $999 million in the South, $786 million in the West, $454 million in the Midwest and $361 million in the Northeast.

Because the South receives the most support and has the highest ratio of E-Rate funding to education output, it would see the largest losses in GDP, labor income and tax revenue, the study claimed.

“Because broadband has become an essential educational input rather than a discretionary expenditure, schools and libraries are unlikely to eliminate connectivity altogether. Instead, many institutions would be forced to reallocate scarce resources away from other educational priorities to maintain broadband services,” the study said. 

The study was conducted by independent economic consulting firm The Brattle Group on behalf of SHLB, and was supported by AASA, The School Superintendents Association; American Library Association; Association of Educational Service Agencies; Association of School Business Officials International; Consortium for School Networking; InnovateEDU; National Coalition for Technology in Education & Training; National Rural Education Association; and Software & Information Industry Association.

“The FCC is asking whether America can afford E-Rate. This study shows America can’t afford to lose it. For every dollar of E-Rate support removed, the study released today estimates about $1.60 in lost economic activity.” Joey Wender, executive director of the SHLB Coalition, said in a news release. “If E-Rate ends, the cost of connectivity doesn’t disappear. It lands on schools and libraries, and they will have to pay for internet access by cutting teachers, counselors and programs. Protecting E-Rate is an investment in our communities and in the economic opportunity these institutions create.”