Story: E-Rate Termination Bill Filed in House, 2/17/99.

(February 17, 1999) Rep. Tom Tancredo introduced a bill in the House on February 10 which would eliminate the e-rate, a Federal Communications Commission program for subsidizing telecommunications services and computer networking for schools and libraries.

HR 692, the "E-Rate Termination Act," is a short bill that would simply delete from Section 254 of the Telecommunications Act of 1996 the language upon which the e-rate program is based. Its lead sponsor, Rep. Tom Tancredo (R-CO), was joined by fourteen other Representatives.

The e-rate is a new program which provides subsidies to schools, libraries,and rural health clinics for various telecommunications services and computer networking equipment. It is currently based upon the 1996 Telecommunications Act. Section 254 of that Act codifies the long standing practice of providing "universal service" support for telephone service in high cost rural areas. However, the Act also includes a subsection which extends universal service support for any school, library and rural health clinic.

The regulatory agency with responsibility for implementing universal service, the Federal Communication Commission, issued an Order on May 8, 1997 which expanded universal service support for schools, libraries, and rural health clinics to include various types of networking hardware, including hubs, routers, network servers, and cable. It set an initial level of funding at $2.25 Billion per year. In June, under pressure from the Congress, the FCC reduced the subsidy level to $1.275 Billion for1998.

The FCC ordered that the subsidies be collected from long distance phone companies, who would in turn to recoup the costs from their customers. Some critics of the program have called it an illegal tax, while others refer to it as the "Gore tax."

Rep. Tancredo said on February 10 that "the FCC pays for this program by getting mandatory contributions from phone companies and others. If you look at your phone bill, you will see that mandatory contribution passed on to you, the consumer, as part of the Universal Service Charge. Mandatory contributions. Mr. Speaker, let us be honest. If it looks like a tax, it quacks like a tax, it is a tax."

"But, Mr. Speaker, this is not just a hidden tax, it is also an unnecessary tax. I have some statistics here from the Congressional Research Service that came before the 'Gore Tax' was created," Rep. Tancredo added. "But before this tax was ever passed, according to the Congressional Research Service, the 1997 student-to-computer ratio in this country was 8-to-1. Also in 1997, 78 percent of all schools were connected to the Internet, remember, before this tax ever came into existence."

Rep. Tancredo also stated that the FCC's e-rate program is redundant of Department of Education spending: "the President has just asked for another $766 million in his Department of Education's budget for education technology alone."

The initial sponsors of the bill are Representatives Tom Tancredo (R-CO), Bob Stump (R-AZ), Charles Taylor (R-NC), Pete Sessions (R-TX), Edward Royce (R-CA), Jim Saxton (R-NJ), Cass Ballenger (R-NC), Jay Dickey (R-AZ), William Thornberry (R-TX), Dan Burton (R-IN), George Radanovich (R-CA), Thomas Petri (R-WI), J.D. Hayworth (R-AZ), John Shadegg (R-AZ), John Doolittle (R-CA).

Sen. Conrad Burns (R-MT) introduced a bill in the 105th Congress that would eliminate universal service funding of the e-rate, and substitute funding from the existing excise tax on telephones. Rep. Billy Tauzin (R-LA) introduced an identical bill in the House. The bill would also sunset the program after five years. Sen. Burns is likely to reintroduce another version of this bill in the 106th Congress.

Supporters of the FCC run program have been defending the program, and sometimes arguing for its expansion. FCC Chairman William Kennard spoke to a meeting of the National Legislative Council of the American Association of Retired Persons on Thursday, February 4, 1999. He stated:

Similarly, Anne Bryant, who has advocated the e-rate program as both head of the National School Boards Association and as member of the Schools and Libraries Corporation board, wants to make the program permanent. Bryant said it should last, "like universal service, for as long as it is needed. I do not see technology going away as a way to increase productivity in the classroom."

Tech Law Journal interviewed Bryant February 2, 1999. She also criticized proposals to fund the program out of the excise tax on phones, and to shift administration of the program from the FCC to the NTIA.

Excerpt from Speech by William Kennard
to AARP National Legislative Council
Washington, DC, February 4, 1999

As a country committed to "equal opportunity to all and special privileges for none," it is our duty to make sure that the technologies that will shape the next century are available to all Americans.

President Clinton and Vice President Gore understand this. They know that in our New Economy what you earn is what you learn. They believe passionately in building a national community where all Americans have an equal opportunity at a better life.

Because of their vision and leadership, we now have the e-rate program. And, as we meet here today, the important work of wiring all of our schools and libraries to the Internet is underway. And, I can assure you, we are making a difference.

Last month, I went to Boston where the e-rate made it possible for that city to wire all of its schools to the Internet -- the first big city in our county to do so. But this was only the first step. We have more to do. We have to make this technology work. We have to unleash its potential.

In Boston, I went to Hi-Q, a computer company in the heart of Roxbury. There, in one of the city's poorest neighborhoods, this company has established a teacher training center to teach teachers how to use technology in their newly wired classrooms, and how to teach students the high-tech skills they need to get the high-paying jobs that this industry offers. Just by connecting schools and libraries with the e-rate, we have now connected thousands of children to the opportunities of the New Economy.

That is why we must not stop with only wiring schools and libraries. We need to make sure that community centers, Y's, senior centers, and all homes who want it can hook up to the Internet and can do so with the advanced, high-speed connections that businesses enjoy.

See, full transcript of this speech in the FCC web site.