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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) was tasked with implementing the universal provisions of the act and on May 7, 1997, adopted its order detailing its 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 administrative structure designed to implement the program; 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, and while legislative measures to modify the program have been introduced, since the 105th Congress, none have been enacted. A series of reports, issued by the FCC's Office of Inspector General, raising concerns about the financial oversight of the program has, once again, prompted scrutiny on a number of fronts. In the 108th Congress the House Energy and Commerce Committee and the Senate Commerce Committee 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 yearly program funding level, which was established by the FCC in May 1999, remains at $2.25 billion. For the first six years of the program $12.9 billion in funds have been committed.
