RealTime IT News

FCC Launches E-Rate Inquiry

Three months after a scathing report about the troubled E-rate program, the Federal Communications Commission (FCC) is launching a comprehensive review of the school and library Internet subsidy plan.

The review is part of a broader inquiry into the overall operations of the Universal Service Fund (USF), the long-standing government initiative to provide affordable phone service in rural America.

The USF also funds the E-Rate program in addition to financing telemedicine initiatives and assisting low-income families with their phone bills. Nearly 90 percent of U.S. schools and libraries receive subsidies from the fund.

"Managing the USF in an efficient, effective manner is one of the commission's core functions," FCC Chairman Kevin Martin said in a statement issued late Tuesday. "It is incumbent upon us to take the steps necessary to improve the operational efficiency of the program while providing greater certainty to the recipients."

In a March report to Congress, the Government Accountability Office (GAO) concluded that despite the collection and expenditure of billions of dollars since 1998, the FCC has not developed any measure to track the program's effectiveness.

The GAO said that a weak oversight structure limits the FCC's "management of the program and its ability to understand the scope of any fraud, waste and abuse within the program."

The FCC oversees the program, but outsources administration to the private, nonprofit Universal Service Administrative Company (USAC).

Martin said the review will give the FCC an opportunity to streamline the funding distribution of the E-Rate program. In both the rural and low-income programs of the USF, the FCC applies a qualifying formula while the E-Rate funding is a more complex equation.

One possible approach would be to distribute E-Rate funds directly to schools and libraries according to their size.

"This type of formulaic approach may hold promise for improving the administration of the E-Rate and rural health care programs," Martin said. "By using a formulaic approach to distribute support directly to schools, libraries and rural health care providers, the commission may be able to address the concerns raised by beneficiaries about the growing complexity of the application process while still ensuring that the programs' funds are used appropriately."

Commissioner Michael Copps issued his own statement praising Martin for initiating the review, but he also had questions about a formula approach.

"Such a change could also allow funds to be used for unspecified communications-related services and equipment, rather than requiring applications that specify services and equipment," Copps said. "Tying funds to school size could conceivably result in our rural and insular schools being denied the funds they need for the extraordinary cost of services in these areas, just because they have fewer students."

The E-Rate subsidy was added to telephone bills in 1997 under the Clinton administration and has been dubbed the "Gore tax" for former Vice President Al Gore's enthusiastic support.

Under the program, telecom companies or contractors provide eligible equipment and services to schools and libraries at a discount, and the federal government covers the difference through the E-Rate fund.