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Foes hammering away at e-rate

Defending federal Net connection discounts for low-income schools and libraries is becoming a full-time job for the FCC.

Defending federal Net connection discounts for low-income schools and libraries is becoming a full-time job for the Federal Communications Commission.

Known as the e-rate, the online access discounts were once again called an unconstitutional tax by opponents during a House subcommittee hearing today.

The FCC set up the e-rate under the Telecommunications Act of 1996. The program is expected to dole out to $1.275 billion in the Net access and internal wiring discounts this fall, supported through service fees paid to phone companies by long distance carriers. The bulk of the costs for universal service fees are then passed on to consumers.

For all its good intentions, the e-rate is under siege. If today's hearing is any indication, the criticism won't let up any time soon.

Powerful members of Congress, long distance companies, consumer advocates, and even FCC commissioner Harold Furchtgott-Roth argue that the e-rate is an unfair tax that the FCC created without proper authority.

"My concern is that in enacting a sweeping new welfare program for schools and libraries that went well beyond the more modest discount program authorized by Congress, this agency exceeded the scope of its authority and thereby enacted a new tax, engendering thorny constitutional problems," Furchtgott-Roth stated in testimony presented to the House subcommittee today.

In addition, the Fifth Circuit Court of Appeals in New Orleans is considering this issue and others that were raised by a lawsuit filed by telecommunications companies to overturn the FCC's implementation of universal service.

Rep. Billy Tauzin (R-Louisiana) used the hearing to push his legislation to take the FCC out of the driver's seat. The proposal would fund Net access for schools, libraries, and rural health care facilities using 1 percent of the 3 percent tax that currently goes into the nation's general fund. The remaining 2 percent of the tax would be cut under the bill.

"As soon as we come back from August recess, we'd like to see the leadership embrace our bill," Ken Johnson, Tauzin's spokesman, said today. "While there have been no commitments made, [House leaders] seem to agree that it is a solution that makes sense."

The five-year plan would raise about $1.7 billion for Net access in 1999, and up to $2 billion a year by 2004, Johnson added.

The FCC and the Clinton administration counter that the e-rate is needed to close the so-called digital divide, and that long distance companies are getting other price breaks to offset the new cost of subsidizing Net access.

FCC general counsel Christopher Wright testified today that the agency has accurately carried out the intentions of Congress. He noted that the e-rate has been endorsed by the Sens. Olympia Snowe (R-Maine) and Jay Rockefeller (D-West Virginia), who introduced the portion of the telecom act to provide discounted services to schools and libraries.

"Indeed, they specifically agree that the commission properly provided for discounted Internet access and internal connections to classrooms, the two aspects of the program that have been challenged the most vigorously," Wright stated in testimony.

E-rate foes have nicknamed the program the "Gore tax" after Vice President Al Gore, who had stumped for the e-rate.

Republicans like Tauzin hope to gain public support by offering an alternative funding mechanism and halting fee hikes from major long distance companies, which have promised to raise rates because of the subsidies.

"This a win-win for Republicans. It's a broad-based tax cut for every American and at the same time shows a commitment to education," Johnson added. "The last thing Republicans need to do is kill this program and explain it to the soccer moms of America, librarians, and teachers."