FYI - E-Rate

FYI
E-Rate

On Friday June 12, David Giltrow, Ph.D., Educational Technology & Communication wrote:

E-rate Issues and a Proposal

Opposition to the complex FCC program for phone service subsidies for schools, libraries and rural health centers called "e-rate" has resurfaced with a vengeance. Even a posting on this list has expressed indignation at paying into the universal service fund from which subsidies will be paid based on financial conditions in an area.

Language was inserted into the Telecommunications Act of 1996 by a bipartisan group in Congress which supported better and cheaper access to electronic information and provision of education through electronic connections. But it was a tough battle against a variety of corporate and ideological forces.

The purpose of this posting is to draw attention to two historical points which seem to be ignored in the media's various stories and columns.

First, the need for an educational telephone rate emerged most dramatically and rapidly in this decade. Before the emergence of online services and the Internet, there was not major pressure for schools to have phone service beyond the principal's office and, perhaps, the cafeteria. But in this decade, these one or two lines became inadequate as the Internet developed.

It dawned on the education community, parents, regulators and lawmakers that technology had arrived at the doorsteps of our schoolhouses and libraries. Indeed, in a statewide survey of technology needs for New Mexico's school districts in 1992, the most mentioned item was to have one or more additional phone lines for information and educational uses. But the issue was always how to pay for this recurrent service. Grants or bond funds might pay for computers but phone lines are recurrent costs and the hardest part of a budget to fund on a sustained basis.

For many years, there have been roughly three rate categories for basic telephone services: residential, small business, and negotiated contracts (large businesses and government agencies). Most school systems and libraries generally pay the small business rate set by FCC and state regulatory provisions--often about $60 monthly for basic, no frills service. Large businesses and government agencies can negotiate contracts which will reduce the per line rate closer to residential rates. Higher capacity lines such as T1 obviously cost more.

Adding a couple basic lines to a school or library for information transmission would increase recurrent costs about $1,500 per year, not counting the costs of installation and equipment. At a time when many school districts are reluctant to pay for even basic supplies, this becomes a major financial decision. Add the current political climate of "no new taxes" and the regulators' rationale that businesses can pass their telephone costs onto their clients and we quickly realize how schools and libraries are eager to grasp at the e-rate straw.

So pressure mounted to provide for reduced phone rates for schools and libraries. This provision was fought long, hard, and bitterly as the massive Telecommunications Act of 1996 went through Congress. E-rate subsides emerged as the result of bipartisan supporters of educational and information technology. Telemedicine was added to the bill's language to assist rural health clinics connect with major medical centers.

The actual procedure is to charge the basic business rate and then subsidize that based on a poverty index using school lunch program numbers. With court cases and now the drumbeat of "no Gore tax"--as the phone companies and especially long distance providers' contribution to the universal service fund is being called--increasing, the whole program is in jeopardy as the Congress is about to adjourn for the November election.

There is a second--and seemingly unrelated--historical note which has the smell of a dirty little secret: virtually all interstate and intrastate long distance rates are based on one minute increments from connection to disconnection, rounding UP to the next minute. How convenient for the telecom providers to bill upwards instead of actual time of connection! (For the non-USA readers whose phone companies bill for actual time, congratulations. In the USA, we're still at the mercy of this retro procedure.)

This billing procedure was probably reasonable in the days of hand billing, crude calculators and relatively few dollars spent on long distance. Up to the era of area codes and direct dialling, long distance calls were initiated through operators. Indeed, many long distance communications were through Western Union telegrams rather than Bell telephones--paying by the word rather than the minute (with a three minute minimum for those calls).

In this era of precise time keeping--expressed in hundredths if not thousandths of a minute, we continue to pay AT&T and others for unused time--a call of 1.12 minutes is billed as 2 minutes. If we have a dime a minute agreement, instead of paying $.112, we pay $.20, plus the added federal excise tax. We pay 44% over our actual connection time with this example.

Where are the current opponents of the e-rate proposals--including Consumers' Union--when it comes to this conveniently overlooked excessive billing procedure?

Indeed, it seems to me that this is the vulnerable place to look for finding the e-rate funds--either as a bargaining chip to keep the carriers from passing on their e-rate subsidy to customers or the actual dollars to make the fund solvent and growing.

Obviously, the FCC staff have data or could readily ascertain a statistical estimate of this overbilling and how it contributes to overpayment by consumers to our phone companies so piously protesting the e-rate and its so-called "Gore tax".

Sorry to be lengthy about this. But for all of the complications and tribulations of school and library personnel forced to jump through the bureaucratic hoops to get a few dollars shaved from their phone bill, at least the prospect of more realistic costs are there. Whether the e-rate will fall by the wayside as the result of greedy companies, election year politics, unscrupulous vendors, and weak-willed FCC commissioners is a matter for time and our phone calls to lawmakers to sort out.

David Giltrow, Ph.D.
dgiltrow@mcimail.com
Independent Consultant
Educational Technology & Communication
PO Box 389
Santa Fe, New Mexico 87504 USA
Voice: +(505) 988-4751
Fax: +(505) 983-1095