The Federal Communications Commission launched the Universal Service Fund in 1998, paid for by a modest 3 percent surcharge on consumers’ monthly telephone bills. But as the program grew and the revenue base supporting it declined, this surcharge gradually increased. At a conference in 2012, I noted that it had reached 17.9 percent, rivaling the sucker’s tax that cities put on hotels to fleece out-of-town residents.

Today’s surcharge is more than double that: 42.0 percent for the final quarter of 2026.

Given this unsustainable trajectory, and against the backdrop of congressional efforts to overhaul the Universal Service Fund, it’s worth asking whether the billions spent by the fund annually are achieving any measurable goal. Earlier this year, I mentioned that the Commission’s recent rulemaking proceeding would be an excellent vehicle to bring some accountability to the fund’s E-Rate program. Last week I expanded on these thoughts in an article for the Free State Foundation’s Perspectives series:

The program spends billions annually on the assumption that digital connectivity improves education. But despite two decades of prompting by the Government Accountability Office, the Commission has never shown that E-Rate funding is necessary to keep each recipient school connected, nor has it proven that this connectivity in fact enhances educational outcomes. This long-overdue analysis is critical not only because of the ailing health of the Universal Service Fund from which E-Rate subsidies are drawn, but also because of the growing evidence of the harmful effects of screen time on children and the threat that generative AI poses to the classroom environment.

The article closes with a detailed recommendation of steps the Commission can take to create a culture of assessment, measurement, and accountability throughout the E-Rate program:

One potential study could use a dataset already in its possession: the discount matrix. Each district’s discount rate is determined mechanically, based on its National School Lunch Program eligibility percentage and urban/rural status. Schools just above and just below the discount-band cutoff are likely to be similarly situated regarding many factors that affect educational outcomes such as poverty levels, population density, and local tax base, yet receive different subsidy amounts. If schools just above the cutoff demonstrated better performance on the appropriate outcome metric, that would show the program has an effect. This is the type of regression discontinuity design study underlying the 2006 California study noted above.

The Office should also assess whether and to what extent E-Rate funding displaces state or local funding, as noted above. Economists have asked similar questions of other federal subsidy programs. In the education context, a widely cited 2004 study by Professor Nora Gordon found that a meaningful share of federal Title I education dollars displaced rather than added to local education spending.  The Commission could test whether the same is true of E-Rate, using a similar regression discontinuity design study to the one discussed above, substituting a measure of state or local technology spending as the appropriate variable. If E-Rate is additive, local spending should be relatively flat across schools above and below the cutoff. If local spending falls as the discount rate and E-Rate subsidies rise, some displacement is occurring that the agency should adjust for.

It also recommends that the Commission reverse the presumption that activities that occur on campus serve an educational purpose and therefore are eligible for E-Rate support.

Repealing this presumption would be a significant improvement. Applicants would then be required to explain precisely how they expect an E-Rate project to enhance learning. The Commission should require a cost-benefit analysis that acknowledges the potential harms of increased connectivity, such as misuse of digital devices by students. This recognition would prompt applicants to confront these harms and identify measures by which they might mitigate them at the local level. In this way, the application process gives the Commission some leverage to control the downstream use of federally subsidized connectivity, without having to become a national pedagogy regulator. Applicants should then be required to test their earlier predictions and prove the educational benefit of a past grant as a condition of securing future funding.

The Carr Commission should be applauded for asking difficult questions about the past, present, and future of the E-Rate program. Historically, the program has simply assumed that funding classroom connectivity would improve student educational outcomes. As we wrestle with the effects of screen time on the Anxious Generation and the effects of the AI revolution on learning, that assumption is no longer tenable. It’s time to move from presumption to proof.

The complete article with supporting citations can be found here.