GAO Report: FCC Illegally Formed
Schools and Libraries Corporation

(March 31, 1998)  The General Accounting Office issued a lengthy legal opinion today in which it stated the the Federal Communications Commission's formation of two corporations was without legal authority. The report was welcomed by many Representatives and Senators who have long complained about the FCC's handling of universal service subsidies for school and library internet hookup.

Section 254 of the Telecommunications Act of 1996 covers universal access.   Subsection h authorizes the FCC to provide subsidies for schools and libraries and rural health care providers.

The report was written by GAO Chief Counsel, Robert P. Murphy.  He testified today at an oversight hearing of the House Subcommittee on Telecommunications, Trade, and Consumer Protection.  All five FCC Commissioners also testified at the same hearing.  The GAO is the investigatory arm of the U.S. Congress.

Murphy testified that "we have concluded that the Commission did not have the authority to create the corporations to carry out government functions and operate under the Commission's rules.  Under the Government Corporation Control Act, the Commission needs explicit statutory authority to "establish or acquire" such entities, which the agency did not have."

The GAO report also stated that the corporations, as presently established by the FCC, are beyond the oversight of the Congress, and need not provide budgetary information to Congress.  In addition, the Federal Advisory Committee Act does not apply to these corporations, thus enabling them to exclude the public from gaining access to their meetings.

Ira Fishman, CEO of the Schools and Libraries Corporation (SLC), testified at the hearing that "we are fully accountable to the FCC."  The problem with some members of Congress is that they are not accountable to Congress.  The Congress has no oversight authority over these corporations, as it does over the FCC.

By setting up these corporations under its control, the FCC is attempting to circumvent congressional oversight of, and public access to, administration of this $2.5 Billion program.

The report was prepared in response to a request from Sen. Ted Stevens (R-AK), who is also a critic of the FCC's handling of this matter.

Other Resources:

• Federal Communications Commission.
• General Accounting Office.
• House Commerce Committee.
• House Commerce Committee (Democrats' Website).