eRate funding commitments for the 2004 program year will begin flowing again as soon as President Bush signs a bill passed unanimously by the Senate on Dec. 8 that exempts the eRate from the Anti-Deficiency Act (ADA) for a period of one year, program officials told eSchool News.

Decisions on several thousand school and library applications–worth about $400 million total–had been held up since August because the Universal Service Administrative Co. (USAC), which administers the eRate, was forced in mid-stream to adhere to the ADA, a federal law requiring government entities to have the money in hand before promising it. (See “eRate chaos looms for schools.”

The suspension of funding has had enormous repercussions for schools and libraries from coast to coast, which have come to rely on the $2.25 billion a year in telecommunications discounts the eRate provides to help pay for their telephone service and internet access.

The House already had passed a bill–the Universal Service Anti-Deficiency Temporary Suspension Act (H.R. 5419)– that would allow funds to flow again but Sen. John McCain, R-Ariz., reportedly held up the bill in the Senate because he wanted the House to pass his legislation to regulate the sport of boxing.

The ADA exemption “was used as a wedge to force action on other issues,” the telecommunications newspaper Communications Daily reported Dec. 9. According to the newspaper, McCain finally released his hold on S-2994, a stand-alone ADA exemption introduced by Sen. Olympia Snowe, R-Maine, to “save face” and not be held responsible for withholding funds from children and increasing telephone rates.

eRate advocates vigorously lobbied Congress to pass the waiver before it adjourned for the holidays. Had the Senate not passed the bill Dec. 8, funding to eRate applicants and payments to service providers who participate in the program would have been delayed for at least another month, when Congress reconvenes Jan. 4.

In a joint statement issued Dec. 9, Don Knezek, CEO of the International Society for Technology in Education (ISTE), and Keith Krueger, CEO for the Consortium for School Networking (CoSN), expressed their gratitude for the senators’ hard work on this issue.

“Rather than adjourning for the year after passing major intelligence reform legislation, the Senate remained in session late last night to negotiate and, ultimately, pass legislation that will ensure that desperately needed eRate discounts, many of which have been on hold since early August, reach schools and libraries expeditiously,” they said, adding that “this win is especially significant because it demonstrates that Congress and the [Bush] administration recognize the value of providing internet access to K-12 students and communities around the country.”

At least schools and districts nationwide, they added, can be assured they will receive funding for their telephone and internet service when, at the same time, nearly $200 million has been cut from federal educational technology programs for 2005. (See “Ed funds up $1.4B, ed-tech off $200M.”

“This is good news,” said Della Matthis, Alaska’s state eRate coordinator, of the 11th-hour exemption. “Even after the [funding] wave [issued] Nov. 25, we still had 15 of 50 applicants who hadn’t received funding notices. Right now, they are all accruing debt.”

Schools and libraries will begin receiving 2004 funding commitment letters again as early as this month, said Mel Blackwell, a spokesman for USAC’s Schools and Libraries Division (SLD). “It will not be very long–as soon as the president signs [the bill],” Blackwell said.

Though the exemption was passed, Congress, the Federal Communications Commission (FCC), and the Bush administration still have more work to do, because the exemption is temporary and only lasts until Dec. 31, 2005.

The SLD doesn’t have any possible solutions yet for subsequent years. “We’re just getting in the swing of what [the ADA] means for us this year,” Blackwell said. “I guess we will cross that bridge when we get there.”

FCC spokesman Mark Wigfield didn’t know of any possible solutions, either. “This buys us some additional time for the schools, for us, and for USAC to come up with something,” he said.

The eRate is paid for by contributions to the Universal Service Fund by telecommunications carriers (telcos), which pass the cost of these contributions on to consumers as line-item surcharges on their telephone bills.

USAC collects the contributions from telcos on a monthly basis, but to keep the surcharges on consumers’ telephone bills from getting too high, the agency collects only as much as it needs for the following quarter.

Until now, however, the eRate has operated on a different schedule. Schools and libraries apply all at once, on a yearly basis, about six months before the start of the next program year (July 1). Knowing that invoices for eRate-eligible services won’t need to be paid for several months, the SLD issues funding commitments in waves leading up to this July 1 start date, which helps eRate recipients plan and budget for their needs in the coming school year.

Either Congress will need to make the ADA exemption permanent, or the eRate will need to be completely overhauled to come into line with federal accounting standards.

“Until there is a broader-based effort to completely reform universal service, which is possible, a permanent legislation is the best solution,” said Jon Bernstein, vice president of Leslie Harris and Associates, a legislative specialist for ISTE, CoSN, and other education groups.

It is likely the Telecommunications Act of 1996–which governs universal service, among other things–will be rewritten in 2005, he said.

Knowing this, Matthis said, any solution developed over the next year might ultimately be irrelevant. “Whatever happens in the Telecom Act is going to supercede any Band-Aids that we slap on,” she said.

Matthis is urging folks from the education and library communities to work together to help shape what the new universal service legislation should look like. “We need to come up with a [Universal Service Fund] agenda before Congress opens up hearings on this,” she said. “We need to be proactive rather than reactive.”

Greg Weisiger, Virginia’s state eRate coordinator, suggested to the FCC on Nov. 15 that it look into the feasibility of changing the language used in eRate funding commitment letters to obligate funds for one month at a time instead of a whole year. Because the bulk of these commitments represent monthly recurring charges, he explained, the SLD could issue commitment letters covering just a single month of covered services.

“This idea gets many applicants funded much sooner,” Weisiger said. “It’s not a panacea, but it would work. A legislative exemption would be the best option–but this [also] would work.”

Many people attribute the passage of the ADA exemption to the aggressive lobbying efforts of librarians and the ed-tech community.

“Educational technology supporters reached out to Congress and members of the FCC to let them know how important this issue is,” Bernstein said.

The American Library Association’s Legislative Action Center said its members sent 516 eMail messages and 118 faxes to their members of Congress, as well as 72 eMails to the Federal Communications Commission.

FCC Chairman Michael K. Powell–who, after consulting with the White House Office of Management and Budget, ordered USAC to stop sending out eRate commitment letters earlier this year until it could comply with ADA–issued a statement on Dec. 6 saying an exemption “is necessary to mitigate unnecessary increases to our contribution factor, as well as to ensure our schoolchildren have continued access to computer resources.”

Other eRate news

An Arizona-based telecommunications company pleaded guilty Dec. 8 in San Francisco federal court for defrauding the eRate program. Inter-Tel Technologies Inc., charged with two felonies, agreed to pay the federal government $7 million in fines. The San Francisco Unified School District, which alerted prosecutors to the scheme, will receive 21 percent of the money.

In addition, the company will be placed on three years’ probation, which requires company officials to hire an eRate compliance officer to conduct audits and implement an eRate code of conduct.

The settlement has been delayed by U.S. District Judge Charles Breyer because he wants to investigate who is further responsible at a Jan. 5 hearing, the San Francisco Chronicle reported.


Federal Communications Commission

FCC Order on Reconsideration, issued Nov. 29

Schools and Libraries Division