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To: Stephen B. Temple who wrote (769)	6/13/1998 8:34:00 PM
From: Frank A. Coluccio	Respond to of 3178

FCC Agrees to Cut Spending on School, Library Net Fund [Temp, if we're going to discuss this one at all, here, we may as well be current about it, and get those excise taxes, access charges, surcharges, and USFs straight, while we're doing so. Enjoy, Frank C.] ======= FCC Agrees to Cut Spending on School, Library Net Fund By SCOTT RITTER Dow Jones Newswires June 12, 1998 WASHINGTON -- The Federal Communications Commission, bowing to pressure from Capitol Hill, agreed to cut spending on a new program designed to bring the Internet to the nation's classrooms and libraries. At the same time, FCC Chairman William Kennard announced a series of steps to overhaul the embattled program, which was called for in the 1996 telecom-reform law. Congressional critics have threatened to put the initiative -- dubbed the "e-rate" -- on hold unless spending is cut and structural changes are made. The FCC, in a 3-2 vote Friday, said up to $1.925 billion would be spent on the program for the 18 months ending June 30, 1999. That translates to a maximum of $1.275 billion for calendar 1998, well under its $2.25 billion annual spending cap. "We are overhauling this program and streamlining it because giving our kids access to technology is more important than scoring political points," Mr. Kennard said. "These decisions take every issue critics have raised off the table." The FCC's action freezes collection of funding for the period between July 1, 1998 and June 30, 1999 at $650 million. The commission has already collected $625 million for the first half of 1998. The schools and libraries program is funded largely through fees levied on long-distance carriers like AT&T Corp. and MCI Communications Corp. The Schools and Libraries Corp., which was set up to administer the program, has received more than 30,000 applications seeking $2 billion in 1998. None of the money collected so far has been disbursed. The program will provide discounts of between 20% and 90% on Internet access and internal network connections, with the level of discount based on a school's wealth. The commission said it will take steps to make sure funds go to the neediest schools first. For instance, only the poorest schools will receive money for internal connections, the FCC said. It's expected that all schools eligible for a 90% discount will receive full funding, and most schools eligible for an 80% discount will be funded fully. Overall, schools and libraries that are the most severely disadvantaged will receive 75% of the available funding, the FCC said. As expected, the FCC said it will extend the startup phase of the program to 18 months, a move that will put the initiative on the same budget cycle as most schools. The next funding period will begin July 1, 1999. The commission said it also stepped up efforts to prevent fraud in the program and to make sure funding is used only for telecommunications services, Internet access and internal connections. Some lawmakers have complained that schools want to use the money to cover expenses like carpeting, drywall and paint. The FCC reiterated plans to consolidate administration of several so-called universal service programs. As reported, the Schools and Libraries Corp. and the Rural Health Care Corp. will be rolled into a third nonprofit corporation called the Universal Service Administration Co. Most on Capitol Hill say they support e-rate's goal of bringing the Internet to students. But several key lawmakers have been outspoken in their fears that the program will spend too much and will benefit wealthier schools at the expense of low-income students. Many also fear it will lead to higher phone rates. Some of that concern stems from the fact that long-distance telephone companies are planning to levy new fees on consumers to cover their universal service contributions. The fees cover not only the schools and rural health programs, but also initiatives that keep basic phone rates affordable for low-income and rural households. Mr. Kennard said the FCC will propose rules next week to ensure that customers receive clear and complete information on their bills. Vice President Al Gore, a strong backer of e-rate, said some on Capitol Hill are likely to try to kill the program as early as next week. "Let me be clear," Mr. Gore said in a statement Friday. "We will fight any effort by Congress to end the e-rate. It's time to put more of our children on-line -- and that means taking politics off-line." Some lawmakers have proposed shifting a portion of the 3% federal tax on telephone service to pay for the schools and libraries program. The World War I-era excise tax -- which has been used to service the budget deficit and for general government spending -- raised some $4.5 billion in 1997.