Barton Signals Strong Desire To Revamp E-Rate Program

Telecom Policy Report, Sept 29, 2004

The FCC's oversight of the controversial E-Rate Program is clearly gnawing at House Energy & Commerce Committee Chairman Joe Barton (R-Texas) --and it's doing so in much the same way that it did with Barton's predecessor, Rep. Billy Tauzin (R-La.).

During a Sept. 22 committee hearing, Barton railed against the Commission and its governmental non-profit corporation, the Universal Service Administrative Co. (USAC), for what he described as a failure to "adequately discharge their oversight responsibilities." He said this latest hearing -- the third in what appears to be a continuing series of "one horror story after another" -- could mark the beginning of the end of the E-Rate Program in its current manifestation.

The E-Rate Program is a $2.25 billion-a-year subsidy program that's supposed to help the nation's schools and libraries pay for high-speed access to the Internet. But the program has been fraught with problems from its very beginning.

Many times, the subsidy money is being used by school districts to pay for network upgrades that most Fortune 500 corporations would envy. In some instances, the money has purchased equipment that ended up being stashed in warehouses.

Questioning whether an annual E-Rate allotment of $2.25 billion might be too much, Barton raised the possibility that the figure might be reduced to $1 billion. "I guarantee you that as long as money is available," he said, "people are going to ask for it ... We've already spent $8 billion [since the program began], and there's a real question about how much of that has been effectively used."

Congressional sources familiar with Barton say the Texas Republican would just as soon see the program closed down permanently. At last week's hearing, Barton made no secret of his view that the E-Rate Program ought to at least be suspended until the committee and the FCC's Office of Inspector General (OIG) complete their respective investigations.

However, FCC Inspector General H. Walker Feaster, one of the witnesses who testified at the hearing, told the panel that suspending the program would be a "very radical" step to take, especially since many schools are totally dependent on the program as a way to finance their high-speed connections to the Internet.

Feaster said the OIG will embark on some 250 E-Rate Program audits during the next 18 months, but the office will require 16 additional staffers in order to get the job done.

Investigations aside, Barton wants action now. He suggested that the program immediately be revamped in a way that ties the federal funds to an upfront commitment of tax dollars by the communities requesting E-Rate subsidies. If local taxpayers "are on the hook," Barton said, school board members and administrators might pay more attention to what's happening with the money.

Keeping track of federal money appears to be a much tougher task for USAC. This past August, the FCC took USAC to the woodshed for accounting miscues associated with the E-Rate Program. That action followed in the wake of an OIG probe that uncovered numerous discrepancies in USAC's accounting procedures. The FCC has given USAC until Friday (Oct. 1) to adopt and comply with all government accounting standards.

The Washington, D.C.-based Center for Public Integrity (CPI) in January 2003 published an in-depth investigative a report identifying numerous accounting-related problems within USAC and, in particular, with its oversight of the E-Rate Program. That report can be viewed in its entirety on the Internet at http://www.publicintegrity.org/dtaweb/report.asp?ReportID=492&L1=10&L2=10&L3=0&L 4=0&L5=0.

As near as TPR can determine, a revamp of the E-Rate Program, while needed, does not appear to be in the cards for this session of Congress. But come next year -- after the presidential election and with the start of a new Congress -- it's a good bet the lawmakers will take a serious stab at redesigning the program in a way that requires requesting local jurisdictions to provide some sort of oversight of how the subsidy money is being used. Such a change probably would not seriously impact well-to-do school districts, but it could have a negative effect on poorer districts.

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