House Ways and Means Committee Press Release.
Re: Hearing on HR 4324: E-Rate Reform.
Date: July 24, 1998.
Source: Ways and Means Committee.
FOR IMMEDIATE RELEASE, Contact: (202) 225-7601
July 24, 1998
No. OV-20
Congresswoman Nancy L. Johnson (R-CT), Chairman, Subcommittee on Oversight of the Committee on Ways and Means, today announced that the Subcommittee will hold a hearing on the funding mechanisms of the "e-rate" program, which provides advanced telecommunications services to schools and libraries at a discount. The hearing will take place on Tuesday, August 4, 1998, in the main Committee hearing room, 1100 Longworth House Office Building, beginning at 10:00 a.m.
Testimony at this hearing will be from invited witnesses only. Invited witnesses include Representative W.J. "Billy" Tauzin (R-LA), Chairman of the Subcommittee on Telecommunications, Trade, and Consumer Protections, Committee on Commerce; and William E. Kennard, Chairman, and Harold Furchtgott-Roth, Commissioner, both of the Federal Communications Commission (FCC). However, any individual or organization not scheduled for an oral appearance may submit a written statement for consideration by the Committee and for inclusion in the printed record of the hearing.
BACKGROUND:
In section 254 of the Telecommunications Act of 1996, Congress provided for direct "contributions" by telecommunications providers in support of "universal service," i.e., the concept that telecommunications services should be widely available within the United States. Section 254(h) specifically added a program to provide advanced telecommunications services to schools and libraries at a discount, which established the so-called "e-rate" program.
In response to section 254(h), the FCC created an annual fund, capped at $2.25 billion to pay for the "e-rate" program financed by contributions to the fund by telecommunications providers. The FCC also established the Schools and Libraries Corporation (SLC), an independent not-for-profit corporation, to administer this program.
The funds collected will be distributed to schools and libraries by the SLC in the following manner. Schools and libraries will apply to the SLC for discounts on services. The SLC will determine the percentage discounts, ranging from 20 percent to 90 percent, for each application related to indicators of "economic disadvantage" and "high rates." Economic disadvantage will be determined by eligibility for the national school lunch program, and schools and libraries will be classified as high cost if they are in rural areas and low cost if they are in urban areas. Once the rate of discount is determined by the SLC, the schools and libraries will apply the discounts not only to telecommunications services, but also for information services and internal connections. Service providers will either offset the discounts granted to schools and libraries against their obligations to contribute to the "e-rate" fund or receive reimbursements from the "e-rate" fund.
All telecommunications providers -- local exchange carriers, long distance providers, paging service providers, wireless telecommunications providers -- must contribute to the "e-rate" fund based on their revenues from telecommunications services. However, it appears that some telecommunications providers that pay into the "e-rate" fund will not receive any direct benefit from the fund (i.e., paging companies pay into the fund but may not be able to provide paging services to schools and libraries and thus could not receive any benefit) while some service providers who do not pay into the fund can be reimbursed for services provided to schools and libraries (i.e., service providers who provide internal connections will often be companies who do not pay into the fund).
Beginning on January 1, 1998, some telecommunications providers began passing on the cost of their contributions to the "e-rate" program to their business customers in the form of higher rates. However, beginning in July 1998, several telecommunications providers began passing on the cost by adding a line item to the bills of residential customers reflecting the cost of the contributions.
As a result of the increased rates on consumers in the past six to eight months, the "e-rate" program has received considerable scrutiny by the media, "think tanks," academics and public officials concerning whether the FCC has exceeded its authority by imposing what amounts to a new Federal tax. Several telecommunications providers have challenged the "e-rate" program in Federal court on the grounds that it is an unlawful tax, and this view has been supported by at least one FCC Commissioner.
In announcing the hearing, Chairman Johnson stated: "While I believe that connecting the nation's schools to the Internet is a valuable objective that must be accomplished, I am concerned that the "e-rate" program may be essentially an open-ended tax on American consumers that has been imposed by an independent agency rather than by Congress. Taxation is a legislative function that cannot be delegated. It is the duty of the Oversight Subcommittee to look into this matter to determine whether or not the "e-rate" program is indeed a tax imposed without the authority of Congress."
FOCUS OF THE HEARING:
The focus of the hearing is to examine the funding mechanisms of the "e-rate" program as implemented by the FCC and the SLC to determine the extent to which it involves a revenue or tax matter and whether the program was properly authorized.
DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:
Any person or organization wishing to submit a written statement for the printed record of the hearing should submit six (6) single-spaced copies of their statement, along with an IBM compatible 3.5-inch diskette in WordPerfect 5.1 format, with their name, address, and hearing date noted on a label, by the close of business, Tuesday, August 18, 1998, to A.L. Singleton, Chief of Staff, Committee on Ways and Means, U.S. House of Representatives, 1102 Longworth House Office Building, Washington, D.C. 20515. If those filing written statements wish to have their statements distributed to the press and interested public at the hearing, they may deliver 200 additional copies for this purpose to the Subcommittee on Oversight office, room 1136 Longworth House Office Building, at least one hour before the hearing begins.
FORMATTING REQUIREMENTS:
Each statement presented for printing to the Committee by a witness, any written statement or exhibit submitted for the printed record or any written comments in response to a request for written comments must conform to the guidelines listed below. Any statement or exhibit not in compliance with these guidelines will not be printed, but will be maintained in the Committee files for review and use by the Committee.
1. All statements and any accompanying exhibits for printing must be submitted on an IBM compatible 3.5-inch diskette in WordPerfect 5.1 format, typed in single space and may not exceed a total of 10 pages including attachments. Witnesses are advised that the Committee will rely on electronic submissions for printing the official hearing record.
2. Copies of whole documents submitted as exhibit material will not be accepted for printing. Instead, exhibit material should be referenced and quoted or paraphrased. All exhibit material not meeting these specifications will be maintained in the Committee files for review and use by the Committee.
3. A witness appearing at a public hearing, or submitting a statement for the record of a public hearing, or submitting written comments in response to a published request for comments by the Committee, must include on his statement or submission a list of all clients, persons, or organizations on whose behalf the witness appears.
4. A supplemental sheet must accompany each statement listing the name, company, address, telephone and fax numbers where the witness or the designated representative may be reached. This supplemental sheet will not be included in the printed record.
The above restrictions and limitations apply only to material being submitted for printing. Statements and exhibits or supplementary material submitted solely for distribution to the Members, the press, and the public during the course of a public hearing may be submitted in other forms.
The Committee seeks to make its facilities accessible to persons with disabilities. If you are in need of special accommodations, please call 202-225-1721 or 202-226-3411 TTD/TTY in advance of the event (four business days notice is requested). Questions with regard to special accommodation needs in general (including availability of Committee materials in alternative formats) may be directed to the Committee as noted above.