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Updates to Category 2

In the past, Category 2 funds (previously Priority 2) were not guaranteed to be available for everyone so most districts did not even bother applying for them. Now every school, regardless of discount rate or size, has some amount of Category 2 funding available. Unless you violate any E-rate rules during your procurement, your Category 2 funding requests will be approved.


Utilizing the Funds

Starting in Funding Year (FY) 2015, each school site received a pre-discount budget of $150 per student to spend on eligible Category 2 equipment and services. Once a district spends any of its Category 2 funds at any of its schools, they have 5 years to utilize all of their available funding across all schools. The $150 amount is adjusted annually for inflation, with the amount being $153.47 per student for FY2017. Once the 5 year clock starts, the funding for each school is guaranteed to remain until it is either used up or the 5 year clock runs out.

It is important to note that funds are considered “used” when a district receives a positive funding commitment from USAC. Many times a district may not use all the funds requested for their project due to a variety of reasons (for example: a site survey reveals fewer wireless access points were needed or installation costs were less than predicted). Thus, any requested funds that were unused should be returned to USAC so you can use your full budget wisely.


Guidelines for using your budget
There are several guidelines and rules for using your Category 2 budget:

  • Budgets are calculated per school. You cannot average your budget across all schools or shift unused funds between different schools.
    • The exception to this rule is shared equipment. If any equipment is used by multiple entities (for example a router at your hub site) then you can distribute the cost of the shared equipment across all supported school sites. Note that you must be able to prove this equipment is shared if asked by USAC.
  • Non-instructional facilities (NIFs) do not receive Category 2 budgets.
  • Equipment can’t be moved between schools for a minimum of 3 years unless a school is closed down.
  • Spare equipment is not E-rate eligible. Any equipment purchased with your Category 2 budget must be installed by September 30 following the funding year.

If you do not know the remaining budgets for your schools, USAC has a Category 2 Budget Lookup Tool. For school districts that do not tap into their available funds by FY2019 or have used all of it, it is currently unknown what the future of Category 2 funding will look like. USAC plans to evaluate the current process and decide on a path forward by FY2020.


Eligible Components and Services

A variety of wireless and wired network equipment, as well as maintenance and managed services are eligible for Category 2 funding:

  • Wi-Fi equipment such as access points and controllers (on-premise and cloud).
  • Wired network equipment such as switches, routers, and firewalls.
  • Structured cabling jobs
  • Any software and licenses needed to make eligible equipment functional
  • Installation and configuration of equipment by a vendor
  • Basic maintenance of eligible components
  • Managed Internal Broadband Services

This is not a comprehensive list on what is eligible. For more details, including caveats and limitations to certain services, you should consult the eligible services list that is published for each funding year.


FAQs on Eligibility
  • VoIP systems or handsets?
    • No. Funding for voice and telephony related purchases was phased out as of Funding Year 2018.
  • Wi-Fi site surveys?
    • Yes. Site surveys are considered “design and engineering” which is allowed as part of “Installation, Activation, and Initial Configuration” with new purchases.
    • However, standalone site surveys without a purchase of wireless equipment are ineligible.
  • Advanced security products?
    • No. Only basic firewall functionality is eligible for funding.
    • If you are purchasing firewall equipment, you should expect to cost allocate some of the cost as ineligible.
  • User devices, security cameras, or servers?
    • All of these are ineligible, except servers used for caching.

Managed Internal Broadband Service (MIBS)

In the past, districts could only use Category 2 funds to purchase internal network hardware such as switches and wireless access points or basic maintenance of these components. Now, districts can outsource this to a vendor. The costs of Managed Internal Broadband Service (also known as Managed Wi-Fi) are eligible for Category 2 funding. There is also the flexibility for the district to lease necessary equipment from the vendor or to have a vendor operate existing equipment purchased by the district. If you already pay a vendor for technology support, then you have already have this service and can start paying for it with E-rate funds.


Guidelines and Tips for Managed Wi-Fi

Since Managed Wi-Fi is a service with a recurring cost, as opposed to most Category 2 purchases being one-time equipment purchases, there are some things to keep in mind.

  • If you sign a multi-year contract for services, you have to file for funding each year (similar to Category 1 services).
  • When signing a contract for Managed Wi-Fi, you should ensure that you will have sufficient funding each year to cover the costs of the services. As mentioned above, Category 2 funding is allocated on a per-school basis and funds cannot be shifted or averaged between entities.
  • Remember that there may be one-time costs for new equipment at the start of a contract or replacement equipment if you are seeking managed services on existing equipment.
  • Some contracts allow the district to purchase leased equipment at the end of the contract.
  • Keep in mind that at the end of the contract you will need to go out to bid again for the services per E-rate rules, rather than simply re-sign with the same provider.
  • E-rate will only cover the costs for management of eligible components. If your vendor is also going to be managing servers, student devices, or other ineligible components as part of your service contract, then those costs must be allocated out of your E-rate funding request.