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Federal Communications Commission
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Washington, D.C. 20554
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Internet: http://www.fcc.gov

This is an unofficial announcement of Commission action. Release of the full text of a Commission order constitutes official action. See MCI v. FCC. 515 F 2d 385 (D.C. Circ 1974).

June 22, 1998


For many children across this country, returning to school after summer vacation this year will be a lot more exciting than in the past. That's because last Friday the FCC voted to continue to support a funding mechanism that will give schools and libraries a break on the cost of bringing advanced telecommunications services and internet access to school kids and to the general public. By the end of the next school year, even more schools will be wired for the twenty-first century, and thus better equipped to stimulate learning and train students for the opportunities that lie ahead of them.

Advanced communications systems and multimedia applications have great appeal to children and are invaluable developmental tools. Around the world, these services are transforming the way societies are educating their children and preparing them for the future. Anyone who denies this fundamental fact has lost touch with the uses of modern technology in education today. America must keep up.

Under the schools and libraries discount mechanism, nothing is guaranteed and no service is provided for free. Every school or library will have to put up some of its own money -- up to 80% of the price in some cases -- to be eligible. But now is not the time to zero out our future by eliminating this important part of the Telecommunications Act of 1996. The universal service provisions constitute a cornerstone of the 1996 Act. We have renewed our commitment to the high cost mechanism that continues to keep telephone service affordable in rural and high cost areas, and we must get the schools and libraries mechanism fully operational as well. Discounts to connect classrooms to the internet today means jobs and opportunities in the new economy of the Information Age. To say that we don't need to provide our schools with access to advanced services is like saying we don't need computer networks at the office because the typewriter still works just fine. Suspending further funding for schools and libraries would merely penalize our students and our future for no good reason.

Unfortunately, we were not able to provide full funding for the total amount demanded for 1998 of just over $2 billion. Indeed, we decided to cut funding well below the $1.67 billion amount that could have been absorbed without causing long distance costs to increase. Instead, we froze the current funding level, meaning that we will collect and distribute about $1.275 billion in 1998.

Earlier this month Congress approved a highway bill that will provide over $200 billion in funding for the infrastructure of the twentieth century. How can we even question providing less than 1% of that amount for the infrastructure of the twenty-first century?

So I understand the disappointment of schools and libraries that will not get as much funding as they need. They point out that we could have had hundreds of millions of dollars more in funding for discounts without causing any increase in long distance carrier's costs, given the extent of access charge reductions this year.

Others claim that we are giving schools and libraries too much of a break. Yet the only alternative that these critics presented was to stop funding discounts for schools and libraries indefinitely. That would have meant pulling the rug out from under the thousands of schools and libraries that had filed applications in accordance with the Act and our rules and, more importantly, pulling the rug out from under the opportunity to give school children a year's worth of training and computer-aided learning. I was not prepared simply to stop implementing the law and our rules altogether.

Even though we cut funding, we have ensured that the neediest schools will receive the highest priority when it comes to receiving discounts. We also extended the initial funding period by six months, thus providing a slower funding ramp-up. We are revamping the administrative structure to fold the Schools and Libraries Corporation and the Rural Health Care Corporation into a single entity. We also cut the salaries of the executives of the corporations. And at my direction, the processes of the Schools and Libraries Corporation are being audited and the corporation will refrain from committing one penny in funding until that audit is complete.

Indeed, the Schools and Libraries Corporation is perhaps the most audited and scrutinized entity in Washington. Under constant pressure and oversight, the corporation and its wonderful and dedicated staff have done a tremendous job in an extremely efficient manner, with just fourteen employees. They have also responded to thousands of e-mails and faxes and phone calls. I am proud of the job they have done.

In considering our funding decision, I have taken the time, on a number of occasions, to re-examine our decision to provide for discounts on the installation of the internal connections that ensure that advanced services are provided not just to the schools, but all the way to the classrooms where the students are. Some contend that the 1996 Act was not intended to fund discounts for internal connections. Others, including Senator Snowe, argue that funding for internal connections is explicit in the statute.

As a matter of law, the latter argument is the much stronger one, since in the statute Congress twice said that discounted services should be provided not just to the schools, but all the way to the classrooms. And while some note that 80% of the schools have at least one connection to the internet somewhere in the school, this simply underscores the significance of the point that only 27% of classrooms are connected, a figure that drops to just 13% in the case of the neediest schools. In the statute, Congress said: "Elementary and secondary schools and classrooms . . . should have access to advanced telecommunications services."(1) Elsewhere in the Act, Congress required the Commission to enhance access to advanced telecommunications and information services "for all public and nonprofit elementary and secondary school classrooms."(2) Providing discounts for internal connections is the best way to fulfill this statutory directive. And in the order we release today, we provide discounts for those connections for the neediest of schools, so that children in underprivileged areas can have a fighting chance to prepare themselves for the opportunities of the twenty-first century.

The Schools and Libraries Corporation, as well as the Rural Health Care Corporation, has also been attacked as an illegal structure. I believe these corporations were established well within the authority of the law. Section 254 directed the Commission to establish discount mechanisms, but did not give the FCC any guidance as to the form they should take. So we designed a mechanism that mirrors the funding mechanism that has administered the universal service high cost fund for the last 15 years. That mechanism has worked well and was the most appropriate model on which to base the new universal service support mechanisms. I believe, and the Commission has found, that the establishment of these corporations by the National Exchange Carriers Association (NECA) is consistent with the law, including the Government Corporation Control Act. It has produced an efficient structure and, based on our experience with NECA, we know it can get the job done. These efficiencies will only be increased when we roll the Schools and Libraries Corporation, the Rural Health Care Corporation, and the Universal Service Administrative Corporation into a single entity.

As a result of our actions this year, the debate is no longer about whether the neediest schools and students are first in line. They are. The debate is no longer about whether there should be just one administrative corporation instead of three. There will be only one. The debate is no longer about executive salaries. We have imposed the salary cap recommended by Congress. The debate is no longer about whether this is an out-of-control bureaucracy. It never was and it never will be.

And the debate is no longer about whether universal service funding means that phone rates have to go up. Because we have decided to freeze universal service collections, on July 1 long distance companies will get the full benefit of about $700 million in reductions in the access charges they pay local phone companies, with absolutely no increase in their universal service obligations. That should mean a significant rate decrease for long distance users, provided the long distance carriers act responsibly and pass their savings on to consumers. And we continue to see prices for wireless and other services drop as well.

Now the only debate is whether we enhance the ability of every school and library in every community across the country to gain access to the internet and advanced telecommunications services, or whether we allow the internet to be another example of the alarming divide between the information haves and have-nots. In that debate, I come down squarely on the side of opportunity for all.

1. 47 U.S.C. 254(b)(6) (emphasis added).

2. 47 U.S.C. 254(h)(2)(A) (emphasis added).