Crossed Wires

The Schools and Libraries Corporation, which runs the new program requiring telecommunications customers to toss $2.25 billion annually into a pot to subsidize school and library access to the Internet, is off to a roaring start. (See "Computer Games," November 1997.) It has already gathered 30,759 applications seeking more than $2 billion this year.

But basic flaws in the program are already showing up. In May, AT&T announced it would assess its long-distance customers a 5 percent surcharge to cover the costs of the subsidies, thoroughly riling the Federal Communications Commission. MCI followed suit with its own fee.

The FCC has morphed the subsidy so that it covers hardware, not just services, by agreeing to pay for equipment needed for "internal connections." The program also subsidizes all telephone services, not just Internet connections. As a result, only $88 million of the $2.02 billion requested would go for Internet access; $656 million is for conventional telephony, and a whopping $1.3 billion would cover those internal connections.

Even the FCC's generous interpretations have not satiated the program's clientele, though. Five U.S. senators, led by Commerce Committee Chairman John McCain (R-Ariz.) and his committee's lead Democrat, Ernest Hollings of South Carolina, complained to the commission about reports that schools are forcing bidders for subsidized services to toss in "no-cost" items as part of their bids before they'll even be considered. The freebies include teacher training, 31-inch monitors, cable services, and carpeting.

The FCC's response, in essence, has been, "Don't worry, be happy." The commission says it is reminding applicants that they are legally obligated not to consider such extraneous matters as no-cost items in their bids, and that any such fraudulent submissions are subject to severe civil and criminal sanctions.

Lawmakers--as well as schools and libraries--shouldn't be surprised. The 1996 telecommunications act, which established the Schools and Libraries Corporation, didn't make clear which services would be eligible for subsidies. And once the feds start handing out goodies, disputes about the meaning of regulatory language or the principles of cost accounting automatically become matters of criminal law. The telecommunications revolution is often accused of accelerating the pace of modern life. The schools and libraries program certainly reinforces this notion: The arc from initial hype to fodder for prosecutors is short indeed.

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