Concerns grow over next year's e-rate

Schools and libraries should see the billion-dollar e-rate program as a blessing, but there has been much uncertainty about the future of the subsidy. The effort to help finance Net access for schools has been dogged by questions about the intricacies of applying for the e-rate. The program was scaled back from $2.5 billion to $1.275 billion in its first year after much political pressure.

The Pennsylvania Department of Education is the latest to point out holes in the administration of the e-rate program. It sent a letter to the FCC calling on the agency to announce the amount of funding that will be available for the subsidy next year so that schools can adequately plan.

"We feel it was unfortunate that the funding levels were cut for 1998 and that funding priorities were established well after applicants had spent hundreds of hours reading, completing, and correcting application forms, in addition to adjusting or delaying scheduled technology deployment," Eugene Hickok, head of the Pennsylvania Department of Education, wrote in the letter.

"It falls in the hands of your commission to ensure this does not happen again," he added. "I strongly urge the Federal Communications Commission to set funding levels and funding priorities for the 1999-2000 funding year as soon as possible and to not allow the next e-rate application funding window to continue until such levels and priorities have been established."

The e-rate application window for 1999-2000 opened December 1, but Pennsylvania state education officials argue that it is hard to cut contracts and reapply for the subsidy when they still don't know how much money they'll save this year. Many of the 30,000 schools and libraries that applied for the e-rate this year could be in the same predicament.

So far, Pennsylvania has received only $7 million of the $65 million it asked for in Net access subsidies, a school official said. There still are four more funding waves to go before Pennsylvania will know the score for 1998, and at that point it will have only until January 21 to file its initial application for the new batch of subsidies that will be doled out in December 1999.

"This program takes up so much time for the average school technology director or a lone librarian, and we want the FCC to put the cards on the table and tell us how much money is available so that we know what the priorities are going to be," said John Bailey, director of Pennsylvania's Office of Educational Technology.

The e-rate timeline also conflicts with the regular budgeting process for schools, as most districts will finalize budgets for the 1999-2000 academic year in May of 1998. Pennsylvania's state budget comes out in February, so schools are left having to decide this month or next what they hope to get from the e-rate a year from now.

In addition, there are no guarantees that schools will get what they asked for--this year or next. This means schools could be short on Net access funding for 1998, not having the chance to make up the shortfall in their 1999-2000 e-rate request, and then not be able to come up with the needed balance through their own budgets, because the budgets will be approved more than six months before the 1999 e-rate funding letters come through.

And the schools will need the money because they typically have to sign contracts with companies before they can even apply for the e-rate. Pennsylvania, for its part, had the foresight to tell its schools to write "out" clauses in those contracts that would allow them to cancel them in the event of a shortfall.

"The process is short-circuiting the good the e-rate can do," Bailey said. "We've told the schools to do anything but depend on this."

The FCC set up the Schools and Libraries Corporation (SLC) to administer the $1.275 billion in discounts that cover most of the internal wiring costs for the nation's poorest schools and to subsidize Net access for the rest of the applicants.

The e-rate--which was tacked on to the Telecommunications Act of 1996 requiring the FCC to provide the subsidies under the nation's universal service fund--will cut schools' access and internal wiring costs by between 20 percent and 90 percent. The discount accounts for about 19 cents of every dollar that goes into universal service, which traditionally supports phone service in rural or low-income areas.

But the program has been attacked on many fronts--from its administration to its cost. For example, SBC Communications and GTE have sued to overturn the program.

Pennsylvania doesn't want to bite the hand that feeds it, but officials in the state say the program would be more effective without all the bureaucracy and uncertainty that have plagued it thus far.

The FCC maintains that it is trying to eliminate such concerns to ensure that the program does what it was intended to do: get the nation's schools and libraries online and close the digital divide between technology haves and have-nots.

But, to Pennsylvania's dismay, the FCC is not going to change its process. The agency has directed the SLC to assess the demand only after applications are filed and to then establish next year's funding levels.

"Improvements were made as the program got under way to give funding to the neediest schools and libraries first," an FCC spokeswoman said. "Fine-tuning was necessary during the early stages of this program, which is now successfully in motion, and we aim to provide school and libraries with greater certainty in the future."