Under the Biden Administration, the Federal Communications Commission (FCC) expanded the Education Rate (E-Rate) broadband subsidy program to provide free Wi-Fi on school buses and hotspot devices for schools and libraries to loan to students despite lacking congressional authorization.REF This expansion wastes taxpayer money and encroaches on parents’ authority over their children’s screen use and should be ended.REF

Despite the E-Rate program having spent a massive $40 billion on broadband access over the past two decades, little scrutiny has been focused on whether the program has achieved its goals, especially as applied to the program’s youngest and most vulnerable beneficiaries—preschoolers. The E-Rate program is overdue for cuts and oversight by Congress, and perhaps the Department of Government Efficiency (DOGE), particularly when it comes to dubious justifications about preschool students’ connectivity needs.

The FCC has spent a shockingly large amount of taxpayer money connecting three-year-olds to five-year-olds to the Internet—in some cases, it has provided more than $20,000 per month per preschool. This amount grossly exceeds the market rate of advertised business broadband rates, which reportedly runs around $250 to $350 per month, raising serious concerns about the E-Rate program’s integrity and susceptibility to waste, fraud, and abuse.REF It is unclear what pedagogical impact this spending has—apart from increasing Internet and screen use among children and their caregivers.

What is clear, however, is that the primary beneficiaries of E-Rate’s unchecked expansion are not students, but tech companies, telecom providers, and consultants, and perhaps faculty who can now download large files and videos (educational or not) at much faster speeds. This program needs significant reform to realign with its original purpose: providing affordable telecommunications services for schools and libraries that have a justifiable need but cannot otherwise afford it, not an open-ended subsidy for the technology industry.

Background: Complexity, Mismanagement, Fraud, and Kickback Schemes

The FCC’s E-Rate program funds broadband access for schools and libraries in the United States, subsidizing up to 90 percent of the cost of an applicant’s Internet bill. In 2023, the FCC disbursed approximately $2.4 billion through this program.REF However, the E-Rate application process is notorious for being convoluted and burdensome, involving lengthy and highly technical paperwork, specialized procurement and competitive bidding rules, confusing deadlines, and administrative delays. Because of this complexity, many schools that participate in E-Rate hire consultants to run the process for them. According to the FCC’s Office of Inspector General (OIG), this has led to a cottage industry of E-Rate “consultants who extract a significant amount of money from applicants” by taking advantage of the program’s complexity.REF In addition to benefiting from the program’s bureaucratic morass, many E-Rate consultants have been involved in bribery and kickback schemes that divert funds from the program’s intended beneficiaries.REF

Indeed, over the past 25 years, the Government Accountability Office (GAO) and the OIG have repeatedly reported concerns about the program’s integrity and persistent fraud risks.REF In 2017, the OIG reported that the FCC’s ability to deter and detect fraud during the competitive-bidding process—which determines which broadband companies will receive payments as well as the amount of such payments—has been severely limited due to a lack of controls.REF The OIG has also found repeated instances of fraud in E-Rate, referring millions of dollars’ worth of fraud to the Department of Justice (DOJ), which has successfully prosecuted multiple cases.

In 2023, two defendants were sentenced to prison and instructed to pay $3.5 million in restitution for making false statements and submitting fabricated documents in a scheme to defraud the program.REF Also in 2023, seven defendants in New York were collectively ordered to pay almost $4 million and sentenced to prison for defrauding E-Rate by billing the program for millions of dollars’ worth of devices and services they never provided.REF In a 2023 semi-annual report to Congress, the OIG stated that it continues to open new investigations and has been assisting the DOJ and United States Attorney’s Offices around the country to pursue civil and criminal fraud cases in the E-Rate program.REF

Rather than addressing these persistent problems within the E-Rate program, the Biden FCC under then-Chairwoman Jessica Rosenworcel introduced new fraud risks. Specifically, beginning in October 2023, the Biden FCC voted on a party-line basis to expand the program to fund Wi-Fi on school buses and distribute mobile hotspots for students’ off-premises use—a dramatic break from FCC precedent and the plain language of the Communications Act (which confines support to “classrooms”). In addition to creating new profiteering risks and legal concerns, the FCC has not provided evidence that children will benefit educationally and not be harmed developmentally from having “always online” access to the Internet on school buses or via mobile hotspots. The FCC has also failed to demonstrate that these services would be used predominately for homework rather than simply increasing the amount of time kids spend online—including harmful and addictive social media apps—during the day. This is particularly concerning given recent studies showing that children, particularly in younger age cohorts, are harmed by such exposure.REF

Harm to Preschool Development from Excessive Screen Time

The preschool years are crucial for children’s development of both gross and fine motor skills. Gross motor skills, such as running and jumping, help to build physical coordination, while fine motor skills—such as drawing shapes, using utensils, and catching or throwing a ball—enhance dexterity and control.REF While educational television programs exist for this age group, they should not serve as the basis of a preschool education—nor should the use of tablets. These screen-based activities are sedentary and trigger dopamine responses that encourage passive consumption rather than active play and exploration, which are essential for early development. In fact, excessive screen time may dull cognitive and linguistic development and emotional maturity.REF

Preschool years are also important for developing social skills, learning how to play and interact with other kids, share toys, and problem solve. Play-based, hands-on learning should be the priority, not more individual screens. Given that Internet needs for children ages three to five are minimal, it is perplexing why broadband connectivity costs so much for preschools subsidized by taxpayers. The substantial funding allocated for broadband in preschools is concerning and warrants closer scrutiny.

E-Rate Subsidies Directed to Preschools: New York and California

The FCC’s publicly available E-Rate records show payments to preschools that serve children ages five and under. Head Start schools and school districts received funding in 17 states, with New York and California—the top two states—accounting for just over half of that funding.REF Details about the total funding for Head Start schools and school districts in New York and California reveal shockingly high broadband costs.REF

New York Head Start schools received the most total funding in 2023 with nearly $702,000, and California Head Start schools received the second most with nearly $507,000. In total, over $1.2 million in funding went to 17 Head Start schools and school districts, as shown in Table 1. There is a wide range of monthly costs and subsidy levels.

The largest total payment from the FCC in 2023—just over $190,000—went to Bushwick United Housing Head Start, which has eight locations in New York City. Bushwick United Housing paid for two separate broadband subscriptions with a monthly total cost that ranged from $7,000 to $48,000, of which the FCC reimbursed 85 percent to 90 percent. In 2023, North Coast Opportunities Head Start in northern California reported spending approximately $21,200 per month on broadband and was reimbursed $19,080 per month by the FCC. This premium cannot be explained by remote geography: Many of the preschools are located where broadband competition is abundant, including New York’s Bushwick United Housing and Kai Ming in San Francisco. Rather, it appears that many of the preschools are paying for premium broadband services—involving dedicated lines and huge amounts of bandwidth—that are unnecessary for non-research university use and preposterous in the preschool context.

Other preschools appear to have exorbitant outliers. Sierra Cascade Family Opportunities Inc. Head Start mostly received monthly reimbursements of less than $1,000, but in August 2023, it received a payment, billed as monthly, of more than $64,000 and another of more than $15,000. Cattaraugus Wyoming Project had consistently high reimbursements rates but a broad range from $10,415 in September 2023 at the lowest to $75,450 in January 2023 at the highest.

These exorbitant costs may be attributable in part to E-Rate’s opaque competitive bidding rules and lack of upward limit on the subsidies a school may receive, which incentivizes schools to buy (and broadband providers to market) redundant gold-plated services. After all, given that all preschools listed in Table 1 receive a 90 percent reimbursement rate from the FCC, there is little incentive to keep costs low or to buy only what is necessary.

Consultants, Companies, and Exorbitant Costs

Notably, all but one of the Head Start programs in New York and California used paid consultants to manage their E-Rate applications. While the FCC does not require schools to disclose how much they pay these consultants, E-Rate consulting fees are often structured as a percentage—generally reported between 5 percent and 15 percent—of the funding a school receives, which creates a massive incentive to overbill the federal taxpayer.REF

Applying this range to the $190,972 awarded to Bushwick’s Head Start in 2023, its consultant could have earned between $9,549 and $28,646 for navigating E-Rate’s complexities on behalf of the school. When multiplied by the thousands of reimbursements handled by E-Rate consultants, it becomes clear that a multimillion-dollar cottage industry is skimming up to hundreds of millions of taxpayer dollars from the E-Rate program each year.

Further, it is not clear that these consultants or the E-Rate bidding process are optimizing benefits for the schools. The following Head Start schools that paid more than $20,000 in a month received broadband service through companies with minimal online presence or publicly accessible information:

• Bushwick’s broadband provider is listed as Fusion Voice and Data Corp (which appears to be doing business as “Fusion Networks LLC”). Fusion’s business model involves installing its own fiber optic lines to the client and then contracting with a third-party competitor to provide an additional redundant connection.REF While these features may explain Bushwick’s high monthly costs, they seem highly unnecessary for preschool children.
• Kai Ming’s broadband provider, Chunghwa Telecom Global, Inc., is the U.S. subsidiary of Chunghwa Telecom, the largest telecommunications company in Taiwan. The company’s website shows operations in the U.S., but most of its systems are in Singapore, Hong Kong, and coastal China.REF
• North Coast Opportunities’ broadband provider is named, seemingly without a sense of irony, The Cost Cutters.REF According to information on its website, the company purports to reduce operating expenses for Internet, printers, and cellular service.REF This company does not appear to offer broadband directly. It is baffling that broadband for 263 students across 11 locations cost $21,200 or $80 per student per month for shared resources that are likely grossly underused, especially during the summer.

Conclusion

While this analysis focuses on one aspect of E-Rate—broadband subsidies for preschools—it highlights broader flaws in the program and underscores the urgent need for reform. These findings add to concerns over the program’s expansion into areas like Wi-Fi hotspots and Internet access on school buses—both of which extend telecommunications services beyond the classroom and the purpose of E-Rate.

Rather than continuing to expand E-Rate, the FCC should overturn the recent expansion, and Congress or DOGE should conduct a thorough audit to ensure that the program truly benefits children rather than serving as a vehicle for arbitrage and fraud. Research has made clear the harmful effects of excessive screen time on children. Yet, it appears that the primary beneficiaries of these substantial broadband subsidies are Big Tech companies, telecommunications providers, and consultants—not students.

Instead of pouring resources into broadband expansion for preschools, policymakers should prioritize investments that enhance in-classroom learning and reduce reliance on screens as a substitute for education for preschoolers and K–12 students alike.

Annie Chestnut Tutor is a Policy Analyst in the Technology Policy Center at The Heritage Foundation.