Tauzin plan would block tax for E-Rate

Rep. W.J. "Billy" Tauzin (R-La.) was expected last week to introduce legislation to block the Federal Communications Commission from levying a separate telecommunications tax to fund the Education Rate (E-Rate) program, a billion-dollar program designed to subsidize Internet connections for schools.

Tauzin, chairman of the House Commerce Committee's Telecommunications, Trade and Consumer Protection Subcommittee, wants to reduce an existing excise tax that now feeds the nation's universal telephone service plan and use the balance to fund the E-Rate program.

"Rep. Tauzin is deciding between two different approaches," a spokesman for Tauzin said. "One cuts the excise tax in half, and the other would cut it by two-thirds. Either way, there would be direct savings on the excise tax."Sen. Conrad Burns (R-Mont.) is considering a companion measure.

Meanwhile, the Senate Commerce, Science and Transportation Committee this month called for the FCC to better police applications by public schools under the E-Rate program.

The committee also recommended that the School and Libraries Corp. create rigorous internal control policies to prevent abuse by schools requesting subsidies to purchase equipment that is not included in the program. The SLC is a not-for-profit organization formed by the FCC to administer the E-Rate program.

The Clinton administration conceived E-Rate as a way to subsidize the cost of wiring schools, especially those in poor districts. The program is funded in part by surcharges collected by telecommunications carriers.

"I do support the goal of bringing advanced telecommunications services to our nation's schools and libraries," said Sen. John McCain (R-Ariz.). "I do not, however, support the program concocted by the FCC and implemented by the [SLC]."McCain accused the FCC of turning a "modest proposal" to wire the nation's schools into a "behemoth" that threatens to increase the nation's phone bills.

This month's hearing marked the second round of congressional E-Rate attacks. Congressional criticism spurred the FCC in June to reduce E-Rate's budget from $2.5 billion to about $1 billion.

The FCC may combine three organizations responsible for administering separate pieces of the Universal Service program, which guarantees telecommunications access to rural America. Specifically, the FCC last week solicited comments on a plan to merge the SLC with the Rural Health Care Corp., which administers the telemedicine companion to the E-Rate program. The two would then be put under the authority of the Universal Service Administrative Co., which handles traditional telephone service under the Universal Service program.

The General Accounting Office, which conducted a six-week investigation into the SLC, told the committee that the SLC had originally planned to review "high-risk" E-Rate applications after committing funds.

"Should the corporation find major problems at this time with the applications reviewed, it may have to reduce or withdraw funding commitments from applicants," said Judy England-Joseph, director of GAO's Housing and Community Development Issues Division.

SLC chief executive officer Ira Fishman, however, vowed to adopt GAO's recommendations and amend internal control procedures to Congress' satisfaction before sending out E-Rate checks to schools.

"Among the applicants, I am known as a policeman," Fishman said. "It is a label I wear proudly."

Sen. John Rockefeller (D-W.Va.) defended the progress that the SLC has made in safeguarding E-Rate funds against abuse. "GAO has produced a roadmap for strengthening the E-Rate program, and SLC has agreed to make the changes GAO has suggested," he said.

"The problem appears to be up here, not down there," Rockefeller said, referring to congressional interest in E-Rate.In response to the hearing, FCC chairman William Kennard circulated an open letter written to Fishman urging him to take up some of GAO's recommendations. Kennard instructed the SLC to conduct random samples of applications to measure their soundness.