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Hearings Held on E-rate Excise Tax Bill

A House subcommittee held hearings Sept. 30 on a bill that would transform the E-rate program into a block grant program funded by the telephone excise tax. But during the course of the hearings, officials from the Federal Communications Commission and Commerce Department urged the legislators not to change the program because it would disrupt it too much. 

The legislation, the Schools and Libraries Internet Access Act (HR 1746), was sponsored by Rep. Billy Tauzin, R-LA, chairman of the House Commerce subcommittee on Telecommunications, Trade and Consumer Protection. It would cut the telephone excise tax by two-thirds over five years, then turn the remaining revenues over to the Commerce Department's National Telecommunications and Information Administration to distribute to the states for the purchase of equipment "essential to permit . . .access to advanced technologies." Under the bill, the program would be phased out after five years by which time, Tauzin said in opening remarks, "all of our schools should be connected to the information highway."

FCC General Counsel Christopher J. Wright acknowledged that implementing the E-rate program "has not been an easy task, and it certainly has not been without controversy." But he noted that three and a half years after the program was approved, the U.S. Court of Appeals for the 5th Circuit had recently upheld the approach the FCC took in setting up the program. Thus, he said, "there is no legal need to modify the current method of administration." Instead, he added, Congress must determine whether the benefits of a different method of administration will outweigh the difficulties that starting afresh might create. Wright contended that the language of the Tauzin bill was as ambiguous as the language of the 1996 Telecommunications Act that created the program, and thus a new law would be subject to the same kind of legal challenges that the original legislation had just survived.

Similarly, Kelly Levy, acting associate administrator of the NTIA's Office of Policy Analysis and Development, noted that NTIA did not have the resources or infrastructure in place to run the E-rate program, and that it would incur large start-up costs-costs that had already been incurred by the Universal Service Administrative Company. "While the USAC may have experienced some start-up difficulties, we believe that they have taken the appropriate corrective actions" she said. "More time is needed to allow the system to work."

Wright noted that the appeals court had rejected the FCC's formula for calculating Universal Service Fund contributions, saying it could not base it on carriers' intrastate revenues. Wright noted that the court had recently denied all of the petitions to rehear the case, and said there was "little doubt" that the Supreme Court will be asked to review some aspects of the decision.


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