E-Rate's Success Silences Critics

E-Rate's Success Silences Critics<@VM>Boon to IT Vendors

Keith Krueger

By Gail Repsher Emery, Staff Writer

Despite early opposition to the federal government's E-rate program to wire schools and libraries, the initiative has been so successful, it's unlikely to end any time soon, government officials and telecommunications policy experts said recently.

"The E-rate has enormous support in Congress and the states and the municipalities where it has served the public well. I would doubt legislation that would end the E-rate would be likely to pass," said Susan Ness, a commissioner of the Federal Communications Commission, which helps oversee the E-rate program.

"In the future, I expect policy disputes over how it is funded and who manages it, not over whether or not it should exist," said Leslie Harris, a Washington lobbyist representing education and technology organizations supporting the E-rate program.

Information technology vendors took the same view.

"The debate is how to fund it, not whether to continue it," said Ronald Sheps, education market manager for the WestCon Group in Tarrytown, N.Y., a distributor of networking equipment.

The E-rate, or Education Rate, was established in the Telecommunications Act of 1996 to provide discounts to schools and libraries to connect to the Internet. According to FCC Chairman William Kennard, $3.65 billion in E-rate funds have been distributed since the subsidies began in 1998, and 1 million public school classrooms have been wired.

A study released in September by the Education Department and the Urban Institute found that 75 percent of public school districts and individual schools have applied for E-rate funds, and nearly 84 percent of the money has gone to public schools. About half of public libraries and 15 percent of private schools have applied for the funds.

The Telecommunications Act, which deregulated the telephone and cable industries, included a provision that required phone carriers to offer Internet discounts to schools and libraries. The companies paid for the discounts by adding a charge to consumers' long-distance phone bills, a practice that initially spurred significant opposition to the E-rate.

The FCC said the E-rate charge on a $20 monthly long-distance phone bill would be 47 cents, or $5.64 a year.

David Bolger, vice president of communications for the U.S. Telecom Association in Washington, said the trade group's 1,200 members were troubled by the way the program was managed at first. Consumers complained about the charges on their phone bills and said they were not seeing improvement in their schools.

"It took an inordinate amount of time for [the program] to get things up and running," he said.

Because of Vice President Al Gore's support of the E-rate, some Republicans in Congress dubbed it the "Gore Tax." However, talk of the Gore Tax and legislative opposition to it have nearly died in the wake of the program's success.

"There were very loud and vocal critics [of the E-rate]. Those critics don't seem to be as loud because the money is making a difference," said Keith Krueger, executive director of the Consortium for School Networking in Washington.

"There doesn't seem to be very much push for those bills" that sought to end or change the E-rate, said Mark Uncapher, vice president and counsel of information services and electronic commerce for the Information Technology Association of America in Arlington, Va.

Washington lobbyist Harris said the E-rate "has been the most important catalyst to developing plans and bringing technology to the classroom."

Data from the National Center for Education Statistics backs up supporters' enthusiasm for the E-rate. The percentage of public schools connected to the Internet increased from 35 percent in 1994 to 95 percent in 1999, according to the center. The percentage of public school classrooms with Internet access increased from 3 percent to 63 percent in the same period.

Under E-rate, schools and libraries may receive discounts of 20 percent to 90 percent on phone service, Internet access and network wiring. The discounts depend on the poverty level of the school and its rural location.

The program is one of four administered by the Universal Service Administrative Co., a Washington nonprofit set up by the FCC to provide affordable telecommunications services through the federally mandated Universal Service Fund.

Complaining about the E-rate has subsided dramatically. "People are saying it's good," Bolger said.Increased sales under the program have made it popular with vendors.

"There's a huge amount of money that's been allocated from the federal government, so the opportunity is huge," said Tom Kirk, vice president of Corporate Networking Inc., a Lansdale, Pa., reseller of networking equipment. The company has seen its revenue increase 30 percent in the last year, largely because of an E-rate account with the school district of Philadelphia.

Sheps has seen similar results. "More than a third of our education sales are being driven by E-rate," he said.

The E-rate accounts for a tiny part of revenue at multibillion dollar systems integrator IBM Corp. of Armonk, N.Y., but company officials have seen the effects of the program, nonetheless.

"It gives [schools] a chance to target their funds toward systems management, computers and teacher training. Those things now seem to be getting a greater priority," said Phil Kibler, public-sector practice leader for IBM Global Services.

Online content providers also have benefited from the E-rate.

"A significant percentage of our revenues are validated by the E-rate," said Barbara Kurshan, chief education officer and executive vice president of BigChalk.com, a 10-month-old New York company that provides online services and tools to teachers and parents.

"We have a new curriculum package online for teaching literature. Schools wouldn't even consider that solution unless they had the infrastructure in place," she said. "We'll sell more products, and [the program] will influence products we will now develop."

Even if all U.S. classrooms are wired, E-rate funding likely will continue to keep the technology current, ITAA's Uncapher said.

"The good news is that it has helped wire the schools. The bad news is that people usually want the latest and greatest technology," he said. "If you want to keep the resources up to date, you have to keep replacing the technology. The E-rate could be used to do that."

Despite ? or perhaps because of ? its success, the E-rate isn't a big part of the presidential campaign.

A Sept. 28 search of the Lexis-Nexis database for stories in major U.S. newspapers mentioning the candidates' campaigns, and the E-rate turned up just six articles in the past six months.

"That dog isn't barking," Uncapher said.

However, Dagoberto Vega, a spokesman for Vice President Al Gore, said the Democrat views the E-rate as "integral in his education agenda."

Gore touts his support of the E-rate on his Web site. As president, Gore said he would finish connecting every U.S. classroom and library to the Internet, train all teachers to use the technology, expand access to modern computers and encourage development of educational software and online resources.

Texas Gov. George W. Bush's education policy paper said the Republican wants to change the way the federal government funds education technology. Bush wants to combine eight Education Department programs, worth $730 million annually, with the E-rate, worth $2.25 billion each year. He also wants to give schools greater flexibility in spending the money.

A combined technology fund, Bush's campaign says, "would ensure that schools no longer have to submit multiple grant applications and incur the associated administrative burdens to obtain education technology funding."

While Bush's plan "involves an implied criticism about the [E-rate] program, it's not a big issue at this point," Uncapher said.

Even so, some are questioning whether a program that raises funds through phone bills should be combined with programs funded through the government's annual budget raises. "I'm not sure of the authority of Congress to move [the E-rate] or the authority of the Education Department to manage it," Harris said.

Vega said Bush's proposal would end the E-rate, because "by moving it out of the FCC, you disconnect it from its funding source."

Tucker Eskew, a Bush campaign spokesman, offered a different view.

"The Universal Service Fund still will be collected by telecom companies, but the E-rate program will be administered by Education. This makes more sense, since Education already has relationships with the districts and schools," he said.

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