On December 3, 2019 the Federal Communications Commission (FCC) released a long-anticipated Report and Order making significant changes to the Category Two Budget methodology that has been in place for the past five years. With this Report and Order the FCC permanently adopts the Category Two Budget approach, originally adopted for funding year 2015, and implements a number of changes to simplify Category Two Budgets and decreases the burden of applying for Category Two equipment and services.

Here are the highlights of the new Order:

Rules for funding year 2020

  • Category Two budgets will be calculated using the same per-site methodology used in funding years 2015 through 2019
  • All per-site budgets will be increased by 20% for funding year 2020
    • Applicants will also be able to utilize unused per-site budget amounts from the initial five-year budget test period
  • All Category Two site budgets will expire at the end of funding year 2020 and will not carry over to funding year 2021
  • The eligibility of caching equipment and services, Basic Maintenance of Internal Connections, and Managed Internal Broadband Services will be retained
    • No new services were added to the program’s Eligible Services List

New Rules for funding year 2021

  • All applicant budgets will be reset
  • Fixed five-year budget cycle for all applicants
    • The first five-year cycle will run from funding year 2021 through funding year 2025
  • Adoption of school district-wide and library system-wide budgets
    • Allows applicants more leeway to apply for equipment for sites where needed, as opposed to which sites have available budget
    • Allows for transfers of equipment between eligible sites
  • Category Two budgets will be based on an inflation-adjusted $167 per student for schools and $4.50 per square foot for all libraries (both rural and urban)
    • These “budget multipliers” will remain the same throughout the first five-year cycle
  • The budget “floor” will be increased from $9,200 to $25,000
  • Allow school district and library system applicants to calculate their budgets using the total student count (aggregate budget: X students * $167) or the number of eligible sites (aggregate funding floor: X eligible sites * $25,000), whichever is greater

The Report and Order may be viewed and downloaded here.

Statements from the FCC Commissioners may be viewed and downloaded here: