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FCC aims to fix e-rate

With critics denouncing the wired school program as too bureaucratic, the FCC is readying a plan to streamline Net access discounts.

With critics lambasting the e-rate program as too bureaucratic, the Federal Communications Commission is readying a plan to streamline the administration of the discounts for school and library Net access.

The public comment period closed yesterday on the FCC's proposal to eliminate the two nonprofit corporations it created to approve applications for the e-rate, which promises to pay up to $1.275 billion this year in Net connections and internal wiring for schools, libraries, and rural health care facilities.

The FCC set up the e-rate under the Telecommunications Act of 1996. The program is supported through universal service fees paid by long distance carriers to phone companies, and the bulk of the cost is passed on to consumers. The FCC estimates that the e-rate accounts for 19 cents for every dollar paid into universal service, which mainly subsidizes phone service.

Backed by a report by the General Accounting Office, Congress members argued that the FCC didn't have constitutional authority to set up the two nonprofit companies to administer the program, the Schools and Libraries Corporation and the Rural Health Care Corporation. Critics say the corporations make up a new bureaucracy, hindering congressional oversight of the e-rate. Foes also are trying to eliminate the e-rate, claiming it constitutes an illegal tax.

To stave off opponents who are threatening the future of the e-rate, the FCC already has cut back this year's funding for the program by 43 percent. Now it is answering Congress's call for a restructuring of the e-rate administration. By the end of the month, the plan could be approved.

Proponents of the restructuring hope it will keep critics at bay and speed up the wiring of poor schools and libraries.

"My sense is that the FCC has made important changes in the program to make the sure questions surrounding the cost of the administration are addressed," Linda Roberts, director of education technology for the Education Department, said today. "Congress needs now to be supportive, not an obstacle to moving forward."

It has been proposed to roll the FCC nonprofit companies into the Universal Service Administration Company (USAC). The USAC has administered the phone service subsidies for low-income and rural residents for more than 50 years.

The nonprofits are expected to become committees under the USAC. The USAC board of directors now could oversee the e-rate--for which more than 30,000 schools and libraries have applied to receive this fall.

By eliminating personnel and streamlining resource demands, the restructuring will cut back on costs for office space, insurance, and human resources, for example.

"It's more to consolidate those services, such as administrative support, and to cut down overhead," said Jodie Buenning, a spokeswoman for the Schools and Libraries Corporation.

The SLC and the Rural Health Care Corporation are now charged with processing the applications.

Once funding commitment letters go out this fall, schools, libraries, and medical centers will know how large their discounts will be. Notably, Net access providers and networking companies will likely make the same profit on the sales and services to schools, but the schools won't have to pay the full cost out of pocket. After getting an invoice, the USAC will pay manufacturers directly to make up for the cost of the discounts.

The restructuring plan also will set up new e-rate application audits to prevent fraud and abuse, and will cut the salary of the SLC's chief executive, Ira Fishman.

For now, however, the SLC is still developing its procedures for both notifying applicants about whether they will receive the discounts and processing e-rate vendor invoices and fraud prevention.