The eRate program, designed to help schools and libraries pay for access to the internet, staggered in mid-June under a barrage of criticism from telecommunications companies (telcos), consumer groups, and certain members of Congress. But as the clock ticked toward the deadline for authorizing 1998 funding for the program, Federal Communications Commission (FCC) chief William Kennard appeared to have the votes to save the eRate.

At press time, sources inside the FCC said the five-member commission would fund the program, but at a lower dollar amount than the total requested by schools and libraries. Those institutions had requested $2.02 billion in internet connection discounts, but the figure most frequently cited as likely to be approved was $1.67 billion. Last minute reversals notwithstanding, disbursement of the first eRate funding was expected to begin near the end of June.

Uncertainty descends

Uncertainty descended over the eRate from the moment four powerful members of Congress demanded on June 4 that the FCC stop collecting money for the program.

“The commission should immediately suspend further collection of funding for its schools and libraries program,” wrote Sen. John McCain, R-Ariz.; Sen. Ernest Hollings, D-S.C.; Rep. Thomas Bliley, R-Va.; and Rep. John Dingell, D-Mich.; in a blistering letter to FCC Chairman Kennard.

The four lawmakers are the ranking Republican and Democratic members of the Senate and House Commerce committees, which hold jurisdiction over the FCC. The lawmakers’ letter brought an already heated political battle between supporters and opponents of the eRate to a boil.

The letter prompted the FCC to cancel a meeting on universal service that had been scheduled for June 9. The FCC had been expected to announce its decision on eRate funding at that meeting.

“Consumers’ phone bills are set to increase,” the lawmakers had written. “This is not what we intended when Congress passed the Telecommunications Act of 1996….We believe it is too late for the commission to rescue itself merely by tinkering with a fundamentally flawed and legally suspect program.”

The letter went on to call the FCC’s work on the eRate “a spectacular failure.”

An ultimatum

The ultimatum from the four lawmakers followed announcements from AT&T and MCI that they would begin charging their residential customers new fees of up to 6 percent starting in July. These invoice surcharges were ostensibly to offset the cost of providing telecommunications discounts to schools and libraries.

Critics of the eRate charged the FCC with creating a bloated, costly program that is forcing these long-distance phone companies to raise their rates. One of the critics’ main objections was that schools would use the eRate funds to improve existing infrastructure.

In an earlier report to Congress, FCC commissioner Harold Furtchgott-Roth, a Republican who was on record as objecting to his agency’s handling of the eRate, wrote, “This entire [surcharge] dilemma has been caused…by the commission’s misguided and unlawful decision to fund inside wiring and other non-telecommunications services.”

According to the Schools and Libraries Corporation (SLC), the agency established to administer the discounts, only $655 million, or 33 percent, of the $2.02 billion requested in eRate discounts this year would fund telecommunications services. Sixty-three percent, or $1.3 billion, would fund internal connections such as routers, hubs, and inside wiring.

But supporters of the eRate countered that telcos themselves are to blame for the surcharges. They argued that phone rates shouldn’t be rising because the FCC has lowered the access fees these long-distance companies pay to local companies by more than $2 billion over the past two years. Access-fee reductions should be offsetting the cost of the eRate, they said.

On June 4, Sen. Bob Kerrey, D-Neb., had written a letter to the heads of AT&T and MCI blasting them for attempting to stir political opposition to the eRate.

Kerrey pledged to introduce legislation requiring telcos to display their profits on their customers’ bills alongside the new surcharges. “If afterward you still feel the Telecommunications Act of 1996 is costing you too much money, I will be happy to entertain any suggestions for repealing it,” he wrote.

Supporters also maintained that funding only telecommunications services would miss the point of the program, which is to extend internet service to all schools universally. Without the one-time expense of wiring and internal connections, supporters said, discounts for telecommunications services would be virtually useless.

The debate spilled over into a Senate Communications subcommittee hearing on June 10, when Kennard and the other FCC commissioners were grilled at length about the program’s cost and efficiency.

“I don’t think anyone in the Senate ever thought that the limited language we included in the 1996 Telecommunications Act would be used to create a massive new entitlement program through universal service,” Sen. Conrad Burns, R-Mont., said in his opening statement.

But Sen. John Rockefeller, D-W. Va., who helped draft the section of the 1996 Telecom Act that created the eRate, saw things differently. As one means of persuading Congress to deregulate the telecommunications industry, he said, telcos promised to fund universal service for schools and libraries.

“We made a deal, and it seems to me we should make people stick to it,” Rockefeller said. “We need to insist on the commitment that these companies made–including AT&T, including MCI.”

A majority of senators pressured the FCC commissioners to suspend the eRate until their concerns about the program could be addressed. But Sen. Olympia Snowe, R-Maine, who also co-authored the eRate provision, blasted her colleagues for trying to kill the eRate.

“If there’s a problem with the bureaucracy, let’s fix it,” Snowe said. “But that shouldn’t be the ruse for freezing this program.”

Prudent progress

Kennard expressed his own determination to push forward “prudently” on the eRate, arguing that the FCC was already addressing legitimate concerns.

Kennard pointed out that the FCC already had voted on May 8 to streamline eRate administration by folding the SLC and the Rural Health Care Corp. into a single entity. The resulting agency was scheduled to begin administering universal service on Jan. 4, 1999. The FCC also would be voting to cut the salaries of SLC officials, Kennard said.

Kennard said the FCC should lengthen from one year to 18 months the period over which eRate discounts are disbursed.

“I submit that the best thing we can do is proceed ahead prudently,” Kennard told the subcommittee. “We shouldn’t abandon the 30,000 applicants who have already invested their time and money in the program.”

Although the basic program appeared at press time to have weathered the initial storm of opposition, the eRate seemed destined to be the source of continuing partisan political combat.

Speaking to a communications industry trade show in Atlanta on June 8, House Speaker Newt Gingrich, R-Ga., issued this prediction about the eRate: “We’ll probably block it in the next two weeks.”

eSchool News Online (for the latest eRate developments)

Federal Communications Commisssion

Schools and Libraries Corporation

eMail Action Center (to send a message to Congress or the FCC)