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Federal Appeals Court Upholds E-rate Program

A Fifth Circuit U.S. Court of Appeals three judge panel last Friday upheld virtually the

A Fifth Circuit U.S. Court of Appeals three judge panel last Friday upheld virtually the full scope of the Federal Communication Commission's E-rate discount program for schools and libraries. The New Orleans-based federal appeals court concluded that the funds the FCC collected to support the program did not amount to an unlawful tax on telecommunications carriers, and that the FCC could subsidize Internet access and internal wiring projects, in addition to telecommunications services.

GTE had contested the FCC's claim that the 1996 Telecommunications Act authorized the agency to fund discounts on Internet access and internal connections. Although the Fifth Circuit ultimately deferred to the FCC's broad interpretation, it did so with great reluctance. The Court found compelling GTE's argument that the FCC had no statutory authority to mandate E-rate discounts on anything but telecommunications services. Indeed, the Court agreed with GTE that "the statute and its legislative history [did] not support the FCC's interpretation." In the end, however, the Court found that it had no choice but to accept the FCC's reading of the 1996 Act, as the language of the statute was "ambiguous enough" to require deference under federal law.

FCC Chairman Kennard called the Court's decision "a victory for America's children."

Because the complex decision covered such a broad range of "universal service" issues, the FCC is still evaluating its implications.

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