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Summary:
Passage of the Telecommunications Act of 1996 (P.L. 104-104) codified the long standing policy commitment to ensure universal service in the provision of telecommunications services. The 1996 Act also expanded the concept to include, among other principles, that elementary schools and classrooms, and libraries should have access to telecommunications services for educational purposes at discounted rates. The Federal Communications Commission (FCC) in a May 1997 action, adopted implementation guidelines. Included within that order was the establishment of the schools and libraries, or Erate, program. Under this program telecommunications services, Internet access, and internal connections will be provided at discounts ranging from 20% to 90 % to eligible schools and libraries. The FCC established the Schools and Libraries Corporation (SLC), an independent, not-for-profit corporation to administer the program. As the result of a January 1, 1999 reorganization, however, the SLC became the Schools and Libraries Division of the Universal Service Administrative Company (USAC) and ceased to exist as a separate corporate entity. The program receives no federal funds but is funded by mandatory contributions from interstate telecommunications service providers. Many of these providers have chosen to pass through universal service charges directly to consumers and earmark a universal service charge on subscribers' bills. Although most support the concept, the FCC's implementation of the schools and libraries provisions of the 1996 Act generated significant and diverse controversy. The decision by various telecommunications service providers to pass through and itemize universal service contributions on subscribers' bills focused further attention on this issue. Concerns focus on : the program's administrative structure; the scope and funding level of the program; and the potential for application fraud, waste and abuse. Since its implementation the E-rate program has been the subject of Congressional scrutiny. A series of reports, issued by the FCC's Office of Inspector General, and by the Government Accountability Office (GAO) raising concerns about the financial oversight of the program has, once again, prompted scrutiny on a number of fronts. The 108th and 109th Congresses have held hearings on the oversight and compliance of the program. The FCC as well as the USAC have also initiated actions to examine and strengthen the program and the Department of Justice has taken action to investigate and prosecute E-rate fraud. The August 2004 decision, by the FCC, to apply the Anti-Deficiency Act (ADA) to Erate program funds has also prompted congressional concern. The temporary disruption of funding commitments during the implementation period resulted in the passage of legislation (P.L.108-494) granting all Universal Service Fund (USF) programs, of which the E-rate is one, a one year ADA exemption. Legislation (S. 241,H.R. 2533) to permanently exempt all USF programs, from the ADA is pending in the 109th Congress. The yearly program funding level, which was established by the FCC in May 1999, remains at $2.25 billion. For the first seven years of the program $15.3 billion in funds have been committed.
