Section 254 - Universal Service: A Success Under Attack

Successes and Failures of the 1996 Telecommunications Act

Part One

Part Two

Part Three

Afterword

Does the Digital Divide Still Exist?

Appendix

Section 254 - Universal Service: A Success Under Attack - The E-Rate and Beyond

by Sean O'Sullivan

Imagine a schoolchild cuts Calcasieu Parish from a map of Louisiana. Then, cardboard structures representing schools, some large, some small, soon dot the page. String connects the schools to each other and then intertwines into a rope reaching beyond the border of the map. The resulting diorama could represent the range of schools and communities that have benefitted from the Universal Service Fund and E-Rate program, not just in the south-western corner of this southern state, but across the country. Of course, these days, the diorama would likely be a computer generated model rather than a construction of cardboard, string, and Elmer's glue. The student might send it from a classroom computer to another schoolchild across the world in a London suburb. Hotlinks to each school's Web site could be encoded into the map, allowing a tour of the district's 59 schools.

All 2,715 classrooms in the Calcasieu Parish Public Schools system (pronounced CAL-ca-shoe) are wired with at least one Internet capable computer. T1 lines connect to all schools and a larger pipeline connects the entire system to the Internet. Last year, the school received discounts for telecommunications services totaling more than $500,000, funded by the E-Rate program.

Calcasieu Parish is not unlike many parts of the United States. There are pockets of urban and rural poverty as well as thriving middle class communities. As with much of the region, this area often struggles economically and did so even before the current recession. There are few industries on the rise and others in transition or decline. The chemical and refining industries so common in this region remain the "bread and butter" of the economy. Other employment ranges from agriculture to aircraft refurbishment and maintenance centered at the Chennault Industrial Airpark in Lake Charles.

If you are thinking of living in Calcasieu Parish and wonder what the schools are like, the 1999-- 2000 School Report Cards and Accountability Reports are online at the school board's Web portal. 1 Each school has its own Web site. Most have links to programs, athletics, photos, elements of the curriculum and even mundane but critical information: on January 8, the lunch at S. P. Arnett Middle School in Westlake was sausage jambalaya, rice, mustard or turnip greens and your choice of milk.

With 34,286 students -- pre-K through Grade 12 -- and more than 4,700 employees, it is the fifth largest public school system in Louisiana and the largest employer in the parish. The parish covers 1,065 square miles from the unincorporated community of Starks on the Texas border through the small inner city of Lake Charles to the rice fields of Bell City. It stretches nearly a third of the way across the state.

"Geographically, we are very diverse," says Sheryl Abshire, District Administrative Coordinator of Technology, "And while in some areas we may have the problems of a city school district, such as poverty and crime, we also have rural students in (single campus) K-to-12 schools."

Although the figures vary from school to school, in the district over-all, 57 percent of students are eligible for free or reduced lunch programs funded by the federal government. This is a key barometer of a community's economic status and the single most important factor in determining the level of the discount a school will be awarded by the FCC.

Abshire helped lead the charge for Calcasieu's schools to gain access to advanced telecommunications and to the E-Rate discounts and other funding sources that make that possible. "Before, we were proficient at teaching and learning but not at technology," she says of the days before the Telecommunications Act of 1996 led the FCC to create the mechanisms for distributing money to connect schools and libraries through E-Rate discounts.

A former principal in the district, Abshire is now a rising figure in the education technology field and sits on the board of the Consortium for School Networking (CoSN). She isn't alone in building a career and finding a mission in the task of connecting her schools, and their students and teachers, to each other and the wider world through telecommunications and computers.

A recent report from the Benton Foundation2 citing data released in 2001 by the National Center for Education Statistics, reported that 98 percent of public schools in the US had access to the Internet by fall 2000, compared with 35 percent in 1994. That year, only 3 percent of instructional classrooms were connected to the Internet. By fall 2000, the figure rose to 77 percent.

"I don't think anyone in the country understood the capacity of need for access. It took off like wildfire," Abshire says about the clamor for E-Rate funds. "It was the first time schools had an opportunity to capture funding that had a huge potential to fund your dreams."

For Calcasieu, those dreams have led to educational programs that would not have been possible without connectivity. Before, gifted students in the district who did not attend a school large enough to boast a dedicated program faced a tough choice. They could leave their school and travel twice the distance or more to attend a larger school or simply not pursue the intellectual challenge of advanced programs.

This fall, the district created an online gifted students class using Blackboard online collaborative education software. A teacher rotates through schools with students in the program, visiting each once a week, and connecting with all the students online each day. The district has also attracted attention as a role model. A group of teachers from Great Britain spent two weeks last fall learning how the district has put computers, technology and access to work. One outgrowth of the visit is that English Literature teacher Doug Devillier's 10th grade courses now include an online component. Students from Calcasieu are matched with classes in England to study Shakespeare together.

But not every district has an Abshire. The very idea of a Federal application process can be daunting, even if the monetary return is so apparent. Schools have to submit detailed plans for how they will set up, use and maintain their networks. Other school officials worry that they will create networks and wire classrooms only to have funding caps or political whim take away the ability to pay for full access or use.

The E-Rate Beyond Schools

Section 254 of the Telecommunications Act 3 recreated a confusing set of cross-subsidies and low-income support programs, mandating that all telecommunications carriers were to contribute to a Universal Service Fund which would retain support for telephone access for rural and high-cost areas, Lifeline and Link-Up, and support access to advanced telecommunications service to beneficiaries including K-12 schools, libraries, and rural health care facilities. The Act left most of the details up to the Federal Communications Commission. The FCC established the Universal Service Administrative Company (USAC), a private, not for profit corporation, to administer four "universal service" programs: the High Cost Program, the Low Income Program, the Rural Health Care Program, and the Schools and Libraries Program. 4

Lifeline and Link-Up help provide basic phone service to the poor. These programs are funded at about $500 million per year. The so-called "high cost" subsidy supports carriers offering telephone service in rural and high cost areas. Lloyd and Montgomery write more about Lifeline and Link-Up in their article on rural America. There are different levels of support depending on the size of the carrier and the cost of service within a specific area. Small carriers receive greater amounts of support than large carriers. This program is funded at about $2.5 billion per year.

Because so much attention, and funding, supports schools, the fact that libraries are also included is often given little attention. As with schools, the FCC provides discounts on the purchase of telecommunications services, Internet access and internal connections to eligible libraries. Eligibility is determined by a formula that looks at libraries' eligibility for subsidies and other support and their geographic location. As of November 2, 2000, more than 4,500 libraries had received about $77 million in discounted services, according to the American Library Association. 5

A July 1999 report from the Commerce Department's National Telecommunications and Information Administration 6 found that 70 percent of rural libraries and 80 percent of libraries serving low-income communities provide public Internet access. The report also demonstrated the importance to individuals of providing such access. Libraries provided access to the Internet for 60 percent of Hispanics and 21.9 percent of the unemployed. Rural African Americans rely on libraries for Internet access more than any other group, according to the report.

The Telecommunications Act of 1996 also includes provisions for improving access to advanced telecommunications service for rural hospitals, clinics and physicians. Public and non-profit rural health care providers are provided discounts that can make their rates about the same as those paid in urban areas. This program is funded at about $400 million per year but initial participation has been far below that of schools and libraries.

Telemedicine for Rural, but not Urban, America

"I think we are still at the very early stages of utilizing technology in telemedicine," says Rashid Bashshur, PhD, Director of Telemedicine, University of Michigan Health System and President of American Telemedicine Association. "The importance of information technology in health care is that it expands the capabilities and reach of health care institutions to serve widely dispersed populations regardless of where they live." This includes rural or Native American populations hundreds of miles from even a tertiary hospital, community health centers operating on a shoestring in the shadow of great urban medical centers, the mentally ill living in the community or in institutions, homebound veterans, and even prisoners.

In total, 483 rural health care providers received $3.4 million, a small portion of the potential $400 million made available for the program's first 18 months (January 1, 1998 through June 30, 1999). According to "2001 Report to Congress on Telemedicine" from the Secretary of Health and Human Services, "In the first year, few providers completed applications for the discount, because most found they could not benefit from it under the original program." 7 Since the first year, the FCC streamlined the application process.

Still, funding in the second year of the program increased to just $6.1 million. According to the 2001 report, FCC and USAC expected that third year funding would increase to nearly $10 million.

Strictly controlling how the government pays for something, particularly something new and innovative (and largely untested) is no real surprise. The program tightly defines who is eligible for funds and in response to surveys potential recipients told HHS the bureaucracy of the process was daunting and cumbersome.

This has also been the case for Medicare reimbursement and for the strict controls placed even on demonstration projects funded by the government.

"They don't want to open it up (too quickly or widely) because of the potential for abuse," says Dr. Bashshur, "but also because of what is called pent up demand where you have people who before did not have access and then suddenly you provide access. But if the need is real, what is wrong with meeting this demand?"

There seem to be almost as many agencies and organizations involved in shaping, paying for or managing the development of telemedicine as there are potential applications for it. Pilot programs exploring how to put telemedicine into best practice are being led by the FCC, the Veterans Administration, the military, and NASA, among others. Even the Department of Agriculture has a telemedicine program.

The Health Care Financing Administration, Centers for Medicare and Medicaid Services, and Health and Human Services, naturally play leading roles, joined by the NIH and a host of universities and hospitals. The American Medical Association and the full compliment of professional societies and individual state licensing boards also influence its development and implementation.

Using superhighways as an analogy for advances in telecommunications gives rise to a powerful symbol of information and services moving with speed and efficiency, linking people, businesses and government in new ways.

Look in the rural Mid-West or downtown Detroit though and one can see that highways also bypassed many small rural communities and made it possible to abandon cities for suburbs. Telemedicine professionals and legislators are working to avoid similar results from the growth of telecommunications.

"In the new wave, in the early 90s, emphasis was placed on remote populations rather than simply underserved populations, regardless of where they live," says Dr. Bashshur. "But people can be underserved and living next to leading facilities in urban centers."

The people at clinics such as Mary's Center in Washington, DC, know this too well. Located on a quiet street in the northwest section of the city, Mary's Center is a community health clinic in a largely Hispanic neighborhood.

The clinic serves women and children with pediatric, maternal health and OB/ GYN services provided by two physicians and a handful of support staff and midwives. It also has five case managers who run teen outreach programs and provide counseling services. The center says 85 percent of its clients are Spanish speaking or bilingual. The majority of patients are provided care under Capital Community Health Plan, a DC-based managed care program for the poor operated by the national for-profit firm United HealthCare.

In January 2000 the clinic began talking with Children's National Medical Center, also located in DC, about becoming a pilot site for a telemedicine project. "At first, it seemed like a pretty expensive thing to put in our clinic," says the clinic's pediatrician, Cheryl Focht, MD, of the computer and probes that will be linked to Children's, "but now I see the benefits for us as well as the patients." One of the clinic's examination rooms has been provided with a computer. They are still waiting for funding for the probes that will allow the system to be used at its full potential. The first application will be oral health. Using probes for the mouth, ear, nose and throat, and a digital cam-era for dermatology, Dr. Focht will be able to send images to special-ists at Children's for consultation.

Dr. Focht says the program will help the center and the hospital bet-ter determine which patients need a visit to a specialist as well as pro-vide treatment recommendations to lessen the need for such visits. "With how overwhelmed Children's is here in the city, I think this will provide us with access and also help them manage the visits they have," she says. "Our parents can't take off work for a series of visits to doctors. If they don't show up for work, they don't have a job," says Dr. Focht. "Often I don't know if an appointment was even kept. You'll send the patient out but then not know if they were seen or the result of the visit."

Monica Villalta, a director of the center, says the program will help demonstrate the role of telemedicine in an urban setting in a city with plenty of providers where the issue is not distance but access. For a clinic like ours this is an incredible resource," says Villalta. "With our low-income families, just getting them here, not to mention to a referral, is just wonderful. It provides us with consultations we could never provide because to get specialist referrals through the charitable system you can have to wait sometimes months."

It Works for Schools

The Universal Service program's impact has been most dramatic in schools. In a September 2000 report, "E-Rate and the Digital Divide," prepared by the Urban Institute for the U. S. Department of Education, "key findings" include the conclusion that "E-Rate Targeting Works: The Neediest Schools are Getting the Most." 8

The poorest schools, those where greater than 50 percent of students are eligible for free and reduced lunch, represent only 25 percent of public school students but receive 60 percent of funds, the report found. The poorest districts (75 percent or more eligible for free and reduced lunch) receive almost ten times as much per student compared to the wealthiest.

Despite its success, the implementation of the universal service has had a tumultuous history and regular threats to its existence, those threats continue today. Though it eventually generated bi-partisan support among influential players in the House and Senate, it had many critics and doubters. Nearly two years later, when the FCC announced specific regulations and guidelines for how the act would be implemented, the attacks began again. Rush Limbaugh and later AEI/ Newsweek columnist James Glassman popularized the term "Gore Tax." This criticism was based on the telephone companies' addition of a Universal Service Fund fee as a line item on phone bills. Obscured by the public relations rhetoric was the fact that passing the cost on to consumers was a decision these companies made, not a requirement and not, in fact, a "tax" on consumers.

But the public was roused, and many protested to their representatives about this new "tax." As a result, the chairmen and ranking members of the House and Senate committees, representing both Republicans and Democrats, who oversee the FCC, wrote a letter complaining to then FCC Chairman William Kennard.

Early criticism also centered on the cost and depth of the bureaucra-cy created to implement the new Universal Service mandate. Indeed, the General Accounting Office questioned the very legality of the FCC creation of the Schools and Libraries Corporation. It was later retooled as the Schools and Libraries Division of the USAC.

On the other side of the debate, a campaign from the Education & Library Networks Coalition generated 20,000 calls and e-mails to phone companies and members of Congress. And even now, polls show that the public overwhelmingly supports the universal service program.

Even as the FCC has streamlined the application process and attempted to better explain year-to-year changes in funding priorities, criticism remains. In the past, things were even worse as the application process involved reams of paper filed in triplicate and signed by hand along each step. Reforms include a recently adopted online application process.

Telecommunications companies have often been the leading source for information and help with E-Rate. John Welling, a regional sales manager for SBC Southwestern Bell, says that outreach to the company's school accounts met with resistance at first. "Initially, there was confusion on filing the technology plans," he says. SBC worked one-on-one to show school districts how the process worked. SBC assigned a field representative to go district to district for hands-on assistance. Today, SBC Southwestern Bell maintains a service center with the singular mission of helping its school accounts navigate the E-Rate process. The benefits to the company are clear when one considers that the sales region includes districts such as the Dallas Independent School District. DISD has an annual total budget of $1.2 billion and more than 164,000 students attending 218 schools. Walling says the benefits are mutual. The schools get connected, SBC builds its revenue and schoolchildren get access to modern technology.

Critics see the very success of E-Rate as an opportunity to tinker with the system's mechanics or even abolish it. Some hoped a Republican administration would turn it into a grant program or hand its management over to the states or the Department of Education only to see their trial balloons popped shortly after launch.

In early 2001, the Bush administration began to talk of merging the E-Rate with other Department of Education technology programs. Senator Jay Rockefeller (D-W. Va), one of the program's key congressional champions, immediately announced his opposition to President Bush's proposal, calling it "a grave mistake. . . a major step backwards." Rockefeller promised to fight any such plans, arguing, "Each school {under the E-Rate} gets to apply for the telecommunications services they want and need. Under the Bush block grant approach, local schools would have less flexibility, not more. Under the Bush block grant, private and parochial schools would have to negotiate with state education agencies and worry about entanglements of federal regulations. Most importantly, the secure funding for the E-Rate and investments in technology would be jeopardized."

The Bush proposal was never formally put to paper, but statements from White House suggest the door is open for the idea to be proposed in future.

For a program that has made such a significant impact in a short time span, any radical systemic changes would be a mistake, says Abshire, the Calcasieu official and CoSN board member. "The funding formula is right. A block grant approach would be a disaster and would take all of the ingenuity and creativity of the system."

"If it ain't broke, don't fix it. It was a little broke five, four, even three years ago, but now it works. It has been an evolution but it is now a mature program," Abshire says.

Beyond reforming the process, some supporters see an opportunity to go even further by widening the mandate. "As we move forward, the idea of what is basic service needs to be revisited," says former FCC Commissioner Gloria Tristani. "More and more Americans are using high-speed access. We may someday say that that is a basic service too. The more technology enhances people's lives, we need to ensure access for everyone."

Commissioner Tristani, now running as a Democrat to unseat Republican Senator Pete Domenici of New Mexico, also points out that not everyone even has basic phone service. Despite ongoing efforts to get reservations connected, less than 50 percent of Native Americans on reservation lands have phone service. For Navahos this figure is below 25 percent, she says, compared to nearly 95 percent for the rest of the population. "Our first Americans should not be the last to be connected," she says.

Endnotes

1. http://www.cpsb.org/

2. Report by Benton Foundation and EDC/ Center for Children and Technology Examines Impact in Chicago, Cleveland, Detroit, Milwaukee at http://www.benton.org/e-rate/e-rate.4cities.htm

3. http://www.fcc.gov/telecom.html

4. See Universal Service Administrative Company, at http://www.univer-salservice.org/

5. http://www.ala.org/oitp/telcom/e-rate_news.html

6. Percent of U. S. Persons Using the Internet Outside the Home By Selected Places By U. S., Rural, Urban, Central City Areas1998 http://www.ntia.doc.gov/ntiahome/fttn99/InternetUse_II/Chart-II-15.html

7. http://telehealth.hrsa.gov/pubs/report2001/main.htm

8. http://www.ed.gov/Technology/erate_findings.html

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