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Sunday, January 30, 2000
By Ann McFeatters, Post-Gazette Staff Writer
First in a four-part series
When America's children began school this term, more than 90 percent of them entered buildings with at least one connection to the computerized world of information known as the Internet. More than half of all classrooms now have Internet connections; nearly all schools have some access to the Internet, if only through a dust-covered computer in a corner of the principal's office.
President Clinton, at an education summit in New York last fall, exulted: "We've made an enormous amount of progress ... in hooking up every school and library in the country to the Internet and with the E-rate making sure that the poorest schools can afford to participate in the information superhighway."
The E-rate is a 20 percent to 90 percent discount for Internet connections, internal connections and other telecommunications services for schools and libraries. It was written into the 1996 Telecommunications Act to make sure that poor and rural children don't suffer technological discrimination because of the high cost of Internet service. All public schools, all private schools with endowments under $50 million, all public libraries and many private libraries accessible to the public qualify to apply for discounts.
But tucked into the law was a big surprise. To pay for the E-rate discount, the federal government started increasing fees imposed on long-distance telephone companies to hook up to local phone companies. Some months later, however, the Federal Communications Commission, which oversees all this, was stunned to find that the long-distance companies had begun passing fees on to consumers to help cover the cost.
Because of the pass-on, telephone customers will be charged $1 billion more this year on phone bills.
The fees average 40 cents a month. But for heavy phone users, the costs are much higher and may total as much as 20 percent of a monthly phone bill. The nation now has more than 500 long-distance phone carriers, many handling the fees their own way. AT&T bills each residential user 99 cents a month. MCI WorldCom charges 7.2 percent of the total long-distance bill. On a $30 long-distance bill, that's a $2.16 fee. Corporate customers and public users, such as the federal government, also are assessed.
The Telecommunications Research & Action Center, a consumer lobbying group, complains that because of all the new fees and complexities, consumers are spending more money on long-distance fees and more time trying to decipher the bills.
New technology, new headaches
While the E-rate program is popular with schools and libraries - one librarian called it "manna from the sky" - it has created many new problems for them as well.
School administrators are finding new headaches in learning they are now signed up for long-term contracts for computer services for their newly acquired Internet connection without knowing where they'll get the money to pay for them.
The often ambiguous language of the 1996 law is clear on one point: E-rate money must not be used for computer software, desktop computers or training for teachers and librarians. Schools have to do the best they can on that score.
In addition, the application process is grueling. Applicants must develop a technology plan, fill out Form 470 and spell out services they want. The bids are posted for vendors of Internet services to see, applicants sign contracts, and Form 471 is then required for the schools and libraries to apply for discounts.
The plight of one librarian in Michigan illustrates the problem.
Donna Alward, director of the tiny Houghton Lake Public Library, believed her library qualified for the program and eagerly went after it.
Accordingly, she dotted the i's and crossed the t's and sent in all her receipts showing the library had paid the connection costs. But her application to the Federal Communications Commission for reimbursement was turned down because the FCC said an agreement between the library and its Internet provider wasn't a legal contract.
She wrote back that the FCC had mislaid the page with her signature on it.
The FCC replied that a letter wasn't good enough.
She wrote back: "Letters signed by me are considered official 'contracts' by all of the library's vendors and the state of Michigan."
Unmoved, the federal government, which sent $56.9 million to schools and libraries in Michigan alone in an 18-month period, said she didn't qualify. Even though she has already spent hours on what seemed to be a failed mission, she's not giving up, especially since the library won approval on three other applications, totaling an additional $10,000. None of those were secured with anything more than a letter with her signature.
Those who are successful in getting through the application process must assure the private, not-for-profit Universal Service Administrative Co. which administers the E-rate program, that service is being provided (schools and libraries have to send in receipts and applicants have to fill out Form 486 to attest that service has started). Only then do the vendors get paid the amount of the discount.
After going through all that, some schools and libraries get only a few hundred dollars. In the wave of funding last August, for example, Utah schools got only $2,520 and the entire state of Arizona got $20,293. But some states received a lot more, such as Mississippi, which got $4,178,649. Pennsylvania got $711,712, and Ohio got $316,761.
In the meantime, millions of parents are wondering what their children are learning on the Internet and teachers are trying to figure out how to teach a class of wriggling 7-year-olds or computer-savvy junior high students by using the Internet. Many students are frustrated because their classroom computers sit dark and unused or because so many children line up to use the computers that individuals don't get much time on them.
Tracking the money
The new, multibillion-dollar E-rate program generates other concerns as well.
Although the program passed an audit last January by Price Waterhouse Coopers, the General Accounting Office, watchdog arm of Congress, has harshly criticized the start-up operations as sloppy. GAO investigators sought approval to have an ongoing investigation because they are still worried about the potential for fraud and abuse.
As a result, government auditors now require that each application pass a "program integrity assurance" review to guard against waste or fraud. There also is now an E-rate integrity phone line. Anyone who wants to report a possible misuse of program funds or a violation of program rules may call 1(888)203-8100 and say: "This is a Code Nine call."
The amount of money at stake is staggering.
The FCC is responsible for deciding whether to fund the E-rate program and by how much. But when it gave the Universal Service Administrative Co. the power to oversee the program, it also gave it $1.92 billion for the first 18 months, which helped about 25,000 schools and libraries out of about 30,000 that applied. About 640,000 classrooms were wired in the first 18 months, about one-fourth of the nation's total number.
Pleased by that, the FCC authorized Universal last spring to spend $2.25 billion more in its second year. Administrative costs are running about $28.6 million a year.
Not all the money has been given out in either year. For the first year, Universal expects the total distributed to amount to $1.74 billion; for the second, $1.96 billion. The excess - some $470 million - sits in an interest-bearing account. Some of it may be used to satisfy appeals. The FCC hasn't determined what to do with the rest.
A secret tax
Because taxpayers, through their phone bills, are paying for the program without congressional consent, some in Congress are outraged. Such high-profile lawmakers as Sen. John McCain, R-Ariz., a presidential contender, still argue that this has become a mammoth new education program that Congress did not intend to create.
Conservative political groups complain that the FCC has no business in education, let alone creating a program that is bigger than adult education or vocational education and paying for it with a huge new tax Congress didn't intend to authorize. They also complain that the FCC has let a small, unknown board, Universal Service Administration, which doesn't even have a chief financial officer, decide which schools and libraries get money and how much.
But despite pending legislation to pare the program back or take it away from the FCC, there is little stomach among lawmakers to try to kill it or even to make major changes.
Basically, E-rate opponents believe, they were outsmarted by the White House, which wanted to make political points out of linking children and technology, and smart lawyers and lobbyists who saw a chance to garner a windfall for the fledgling Internet services industry.
McCain said in a recent angry speech: "During the hearings for the 1996 Telecommunications Act, every large company affected by the legislation had purchased a seat at the table with soft money [contributions to the political parties]. Consequently, the bill attempted to protect them all, a goal that is obviously incompatible with competition. Consumers, who only give us their votes, had no seat at the table, and the lower prices that competition produces never materialized."
GTE, the phone company, sued on grounds that the FCC exceeded its authority in permitting E-rate funds to support Internet services instead of only basic telecommunications services. But the 5th U.S. Circuit Court of Appeals said that while the 1996 Telecommunications Act didn't specify Internet services, it didn't prohibit them either. The court basically said that the law was written in a deliberately fuzzy way; as a consequence, the court said, the FCC can do what it wants.
Education groups were delighted at the 5th Circuit Court's ruling but admit they have their own concerns about wiring classrooms to the Internet.
Have computer, will teach
Education Weekly surveyed teachers and found that about half of all teachers do not use computers at all in their teaching and don't foresee using computers. About six out of 10 teachers have had no training on using computers or less than five hours' worth of training.
A U.S. Department of Education workshop has found that education technology training for teachers is almost always a one-shot seminar, usually an afternoon with an expert or 200 teachers in a gymnasium.
Even if well-trained, seven out of 10 teachers say they have difficulty finding software that would make the computers valuable in the classroom.
Administrators complain that they didn't realize that computers would get outmoded so fast. Many say they have storerooms of old computers and no money for new, faster models with the bells and whistles children expect. Or they worry that they don't have enough computers and children are exposed to only a few minutes of Internet access at a time.
Thus, even though the E-rate subsidizes Internet access, the richest schools still have top-end computers and more of them, while the poorest schools have sluggish, cast-off models that are often more frustrating than they are worth.
Administrators say they don't have enough money to train teachers on computers and can't afford to give them time off for training. They worry that E-rate money won't last or will be cut and they will be stuck cutting other programs to foot the bill for expensive Internet connections that aren't getting full usage or the right usage. They worry about the lack of firm data showing that access to the Internet will improve test scores and grades.
Robert Crandall, a senior fellow in economic studies at the Brookings Institution, a Washington think tank, faults the E-rate program on many levels. "Yes, there are lots of applications because this is a freebie. The problem is, once you set up a system in which demand greatly exceeds the supply of money, it's hard to know how you're going to make the decision [on who gets how much]. So you set up a whole system of facades."
Another outspoken critic of the E-rate program, Jerry Hausman, a professor of economics at Massachusetts Institute of Technology, argues that part of the problem is that the FCC is dominated by lawyers, not technical people who could have prevented many of the technical problems that plagued the E-rate program.
Massive fraud and abuse are prevented by the system of receipts and counter-receipts. But that does not stop schools from offsetting money that would have gone for wiring their schools anyway for other things. For example, Fresno, Calif., installed a homework phone line and offset part of the cost with money from the E-rate program, which reimbursed its Internet hookup costs.
But while the debate rages, the program continues on. Amid the blizzard of paperwork and slippery philosophical issues, more and more students sit in front of computers poised to speed down the information superhighway.
(Karen MacPherson, Jack Torry and Jack Kelly of the Post-Gazette National Bureau contributed to this report.)
Matt Dugan, 16, and Anne Campbell, 15, both of Squirrel Hill, look for information about playwright August Wilson on the Internet at the Squirrel Hill branch of the Carnegie Library. (Douglass Oster, Post-Gazette) 
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