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Published in Print: August 5, 1998, as Future Shape of E-Rate Program in State of Flux on Capitol Hill

Future Shape of E-Rate Program in State of Flux on Capitol Hill

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The fate of the E-rate remains uncertain on Capitol Hill, where Congress is weighing a proposal that could change the program dramatically.

Sen. Conrad Burns, R-Mont., and Rep. W.J. "Billy" Tauzin, R-La., have advanced legislation that would use a third--or about $1.7 billion per year--of the current 3 percent telephone excise tax to pay for "telecommunications and related services" in schools and libraries.

Their companion bills, introduced in both the House and the Senate on July 23, propose getting rid of the E-rate and replacing it with a five-year program of block grants to states. The program would be administered by the Department of Commerce's National Telecommunications and Information Administration.

The 30,000-plus applications submitted by schools and libraries for 1998 education-rate discounts for telecommunications services would be transferred to the new program, according to Ben O'Connell, a spokesman for Sen. Burns.

On the same day that the Burns-Tauzin proposal was introduced, the Senate passed the appropriations bill for the departments of Commerce, State, and Justice with an amendment that would require all schools and libraries to choose a system to filter out any objectionable Internet material such as pornography before receiving any E-rate money. Sens. John McCain, R-Ariz., and Ernest F. Hollings, D-S.C., introduced the amendment.

Undue Scrutiny?

The appropriations bill also includes language overriding an earlier amendment that would have prohibited schools and libraries from applying to the Commerce Department's Telecommunications and Information Infrastructure Assistance Program. The new amendment says schools and libraries would be eligible for TIIAP money in fiscal 1999, but only for purposes other than those served through the E-rate. ("Panel Cuts Technology-Grant Program," July 8, 1998.)

Complaints that the E-rate is undergoing an unusual amount of examination for a new government program arose during a July 16 hearing in the Senate Commerce, Science, and Transportation Committee.

"I don't know of any other program that has been created in less than a year and received such scrutiny and review," said Sen. Olympia J. Snowe, R-Maine, a co-sponsor of the E-rate provision contained in the Telecommunications Act of 1996.

Also during the hearing, the General Accounting Office presented its report on how the Schools and Libraries Corp., the agency administering the E-rate program, was handling its "integrity operations." Sen. McCain, the chairman of the committee, had asked the congressional investigatory office to make sure that the SLC had adequate procedures to prevent waste, fraud, and abuse.

Among other things, GAO officials said they were concerned that an independent audit of the corporation had been scheduled for completion after funds would already be committed to applicants.

During the hearing, Ira Fishman, the executive director of the SLC, committed to complying with all of the GAO's recommendations on running the program.

After repeatedly being asked by Mr. McCain to say when the SLC could start paying for E-rate applications, Mr. Fishman estimated that money would start flowing "sometime early this fall."

In response to congressional pressure, the Federal Communications Commission has already dramatically scaled back the E-rate program for 1998 applications, promising to give out $1.9 billion over 18 months instead of $2.3 billion over a year, as was first anticipated.

Congressional challenges to the program were stepped up when AT&T Corp. and MCI Communications Corp. announced in May that they would put a surcharge on residential phone bills for the cost of universal service, which includes the cost of the E-rate.

On July 1, AT&T put a charge of 93 cents per month for universal service on residential phone bills; the company estimates about 23 cents will go to the E-rate program. At the same time, MCI put a 5 percent charge and Sprint Corp. put a 4.5 percent charge on residential phone bills for universal service. Spokesmen for AT&T, MCI, and Sprint deny charges from E-rate advocates that their companies also are lobbying Congress to kill or stall the E-rate.

E-rate supporters monitoring the E-rate program say they hope the SLC's commitment to comply with the GAO report will put questions about the program to bed.

"There's absolutely no reason these discounts can't start going out to children [in schools], and anyone who is trying to say more measures need to be put in place is just trying to delay the program," Michelle Richards, the director of federal programs for the National School Boards Association, said during a recent pro-E-rate rally on the Capitol lawn.

Vol. 17, Issue 43, Page 32

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