After 15 years of neglect, federal regulators are finally planning to tell phone companies selling services to schools and libraries how to comply with a rule requiring them to charge bargain prices.
Last week, ProPublica revealed that the Federal Communications Commission (FCC) had failed to provide guidance for the low pricing rule case since the 1997 launch of the school program, called eRate. Lawsuits and other legal actions in four states turned up evidence that AT&T and Verizon charged local school districts much higher rates than it gave to similar customers or more than what the program allowed.
The preferential pricing rule, called lowest corresponding price, was designed to give schools a leg up in the complicated world of voice and data pricing, and to make sure school children had access to the Internet. But despite evidence of inflated pricing, the FCC never brought an enforcement case against a service provider for violating the rule.
While the main victims of this failure are the nation’s schoolchildren who receive suboptimal broadband access, there’s another set of victims: the vast majority of people with a cellular or landline phone contract. That’s because the program provides a subsidy to schools to help them pay for the telecom services. Telephone consumers pay for this subsidy, usually through a “Universal Service Fund” charge on individual phone bills. The subsidy fund is capped at about $2.25 billion a year.