E-rate OK for now

For many carriers, the E-rate program's benefits are more image- than money-oriented.

Supporters of the popular “E-rate” program for schools and libraries have staved off, at least for this year, President George W. Bush's proposal to turn the federal telecommunications program into state-run block grants.

Testifying before Congress earlier this month, Secretary of Education Roderick Paige said the Bush administration would likely drop from its education reform plan a provision to roll the E-rate program and more than 40 other education technology programs into state block grants administered by the U.S. Department of Education.

Advocates had worried that the E-rate program, which funds $2.25 billion in annual discounts on the purchase of telecom services by schools and libraries, would erode or even disappear if oversight shifted away from the FCC, as Bush initially suggested. The FCC oversees the program as part of the universal service fund that ensures affordable phone service for hard-to-serve customers. The Universal Service Administrative Co. in Washington, D.C., runs the program.

E-rate supporters said the program isn't guaranteed to stay the same. “Our view is we've moved the ball down the field. We still have some concerns about how the administration is looking at the program,” said Rich Hershman, chairman of the Education and Library Networks Coalition, a group of associations that promotes the E-rate program.

The National Telecommunications and Information Administration, which advises the White House on telecom policy, did not return calls for comment.

Telephone companies with retail interstate and international revenues, which pay for the discounts through customer charges, have not been directly involved in the debate, but they have monitored vigorous lobbying by E-rate advocates.

Many carriers publicly support the E-rate — after having lost a lawsuit against the FCC challenging it as an illegal tax. Recently, BellSouth, Qwest, SBC and Verizon paid $2000 each toward a full-page ad in the Feb. 26 issue of Roll Call, a magazine read by legislators and their staffs, Hershman said.

The ad read, “What is Congress doing to help states bridge the digital divide? Thanks to the E-rate, a lot….” The ad then listed how states have divided $5.85 billion in E-rate money given out during the past three years. Last year the program awarded $2.1 billion to 26,300 recipients.

“Most of the telephone companies have spent a lot of money to put in the mechanisms to implement the program,” an industry official said. Under the original Bush proposal, all that effort would be for naught.

E-rate supporters' main fear has been that a steady funding source — carriers' contributions — would be replaced by an annual appropriations process subject to the political whims of federal and state lawmakers.

“When this program leaves the FCC, the telecom companies go with it,” said Emily Sheketoff, executive director of the Washington office of the American Library Association. “The money would have to come from general revenue, and it's not there.”

Another problem with Bush's plan, she added, is that “it appears to eliminate libraries as recipients of the discount.” She said she did not know if this cut was deliberate or accidental.

Private and parochial schools could also have a hard time getting E-rate money under block grants because they would be forced to apply through state agencies, which would likely favor public schools, said Jeff Burnett, director of government relations at The National Association of Independent Schools.

“The program, as it is, is working. A lot of sweat went into this. It's had a lot of bipartisan support [on Capitol Hill],” he added.

Sens. Olympia Snowe, R-Maine, and John Rockefeller, D-W. Va., who created the E-rate program as part of the Telecommunications Act of 1996, met in February with Paige to express their concerns about the Bush proposal.

“We should not permit telecommunications carriers to walk away from this carefully negotiated and balanced commitment to our nation's schools,” Snowe said in a statement.

Another positive sign for E-rate advocates is that a draft education reform bill does not mention or change the E-rate program. “We have no intention of putting any E-rate related legislation on the [Senate] floor,” said a spokesman for the Senate Health, Education, Labor and Pensions Committee, chaired by Sen. James M. Jeffords, R-Vt. However, a bill could be amended when the full Senate considers it, possibly as soon as this month.

Studies and surveys show the E-rate program's popularity. Demand for the money outstrips supply. More than 36,000 applicants requested $4.7 billion for Year 3 of the program, which ends June 30, according to USAC. As of Dec. 1, USAC had committed $2.08 billion to 26,276 applicants.

“The E-rate discount is playing a central role in bridging the digital divide by bringing new technologies and the power of the Internet to America's schools and libraries,” reads EdLiNC's Web site. In 1999, 63% of instructional classrooms were wired, up from only 3% in 1994, according to the coalition.

For many carriers, the E-rate program's benefits are more image- than money-oriented. Most large carriers don't get a great deal of revenue from schools and libraries, but “it's a huge public relations benefit,” said Mel Blackwell, USAC vice president of external communications and rural health division. Most E-rate money so far has gone to wiring companies that don't contribute to the universal service fund.