Published Online: May 14, 1997


FCC Approves Discount Plan for Schools

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The Federal Communications Commission voted unanimously last week to give deep discounts on the purchase of telecommunications services to most schools and public libraries, lowering a major hurdle between schools and the information age.

"This is one of the top five education actions by the federal government in our nation's history," said Gordon M. Ambach, the executive director of the Council of Chief State School Officers, in a reaction that typified the enthusiasm for the move expressed by many education groups.

The cost break for educational institutions, known as the "E-rate," will be available beginning Jan. 1 and could save schools and libraries up to $9 billion over four years.

The FCC order, which implements the "universal service" provision of the Telecommunications Act of 1996, also guarantees that people in low-income and high-cost areas will continue to have affordable phone service.

Just before the vote, Reed E. Hundt, the commission's chairman, said the discounts were needed to provide opportunity and equality for all Americans and to further advance the nation's growing information-based economy.

The new rule sticks closely to the recommendations issued last November by the Federal-State Joint Board on Universal Service, an FCC advisory group.

Schools in places with high telecommunications costs or high poverty rates will receive the greatest discounts--as much as 90 percent.

But all public, private, and parochial schools--as long as they are nonprofit and do not have endowments of more than $50 million--will benefit.

The wealthiest schools will get discounts of 20 percent. Federal officials estimate that the typical school will receive a 60 percent discount.

The discounts cover all telecommunications services, including telephone calls, wireless services, Internet access, and the installation and ongoing costs of internal connections within a building. Computers, software, and training are not covered.

Universal-Service Fund

The companies that provide the eligible services will be compensated from a universal-service fund created by fees paid by all telecommunications providers.

The fees will be assessed only as schools and libraries require the services.

Internet-service providers do not have to pay into the fund, a fact that has dismayed the telephone companies.

The fund has a cap of $2.25 billion for schools and libraries for every calendar year.

But up to half of any unused amount will be carried over to increase the cap for the following year.

For the first six months of 1998, the fund is capped at $1 billion.

Schools must apply to the fund administrator for discounts for specific services.

Then schools will pay the discounted rate, and the service provider will be reimbursed from the fund.

Any company, from a telephone giant to a small-town electrician, will be eligible to provide Internet access and internal connections within schools and libraries and be reimbursed from the fund.

Related Rules

The federal agency also gave unanimous approval last week to two related regulations that make far-reaching changes in the rate structure for telecommunications services.

The rate changes are designed, among other purposes, to provide the wherewithal for phone companies to pay into the universal-service fund without raising charges for basic phone service.

The complex rules reduce the access fees that long-distance telephone companies pay to local phone companies to connect telephone calls.

They also permit local companies to make limited increases in phone charges for additional residential phone lines and multiple business-phone lines.

At a press conference after the FCC's decision, jubilant leaders of education and library groups and their supporters in Congress and the Clinton administration hailed it as a historic social policy. Several said it was on a par with the GI Bill, the law that since the 1940s has given education aid to veterans.

An Electric Moment

Vice President Al Gore, one of the first national leaders to champion schools' access to advanced telecommunications, compared the decision to the introduction of electricity in schools in the 19th century.

But educators have also cautioned that some schools will have trouble paying for telecommunications services even at the maximum discount.

Costly investments in computers, software, and teacher training also will be needed to use technology effectively.

Secretary of Education Richard W. Riley relished the moment, then emphasized the task yet to come.

"We have a great responsibility," he said. "Most of all, we must show that it really makes a difference in the classroom."

Additional concerns about the decision were voiced by companies that provide local telephone service.

Marvin Bailey, the director of federal relations and educational policy for the Chicago-based Ameritech Corp., said he supported discounts for schools, but he questioned the "recovery mechanism" for the universal-service fund.

Mr. Bailey said the regional Bell telephone companies oppose giving schools discounts for internal connections and Internet access because they believe those are outside the scope of the Telecommunications Act.

The regional Bell companies estimate that those services will make up about 60 percent of overall spending from the universal-service fund.

If school discounts for internal connections and Internet access were excluded, the fund would require only $1 billion annually from the various telecommunications providers, Mr. Bailey said.

If the companies decide to sue to block the rules, a court could put the E-rate on hold pending the outcome of such a suit.

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