Under pressure to eliminate Internet subsidies to wire schools, libraries, and rural health care providers to the Internet, the chairman of the Federal Communications Commission told Congress on Wednesday that he would reduce rather than abolish the program.
"I think that the best thing we can do in the best interest of this program and the public is to proceed ahead prudently," William Kennard told the Senate Commerce Committee's communications subcommittee, which grilled him for more than three hours about the cost and efficiency of the program that began this year but has yet to dole out a dime. "In my view, that is not to abandon the 30,000 applicants who have invested their own money and time in getting this program to where it is today."
Kennard said the FCC will decide on Friday how much money the program will receive for the rest of the year. Talking with reporters after the hearing, Kennard wouldn't say what level of funding he supports (the FCC originally capped the program at US$2.65 billion a year) or whether he has the three votes needed to continue the program.
The FCC is considering taking until the end of June 1999 -- rather than January -- to pay for the initial round of the subsidized hook-ups. Commission officials say the move will lower the amount of money that would be collected from telcos. After that, funding for the program would run on a fiscal year beginning 1 July 1999.
The subsidy program is supported by the White House, educators, and librarians. It's opposed by consumer groups, and the Republican chairman and ranking Democrats on Congressional telecommunications committees.
Last week, a group of congresspeople opposed to the program turned up the heat on the agency and demanded that no money be raised for the second half of the year. They charged that assessments on long-distance carriers for the program would raise consumers' phone bills.
Lawmakers objected to the FCC's handling of the program after AT&T and MCI said they would pass on the 5 percent surcharge to customers. Beginning in July, both companies would use the surcharge to pay for their share of the program, as well as other longstanding subsidies that support basic phone service in low-income and rural areas.
But supporters of the program said the companies were to blame for adding surcharges at the same time the FCC had lowered by billions of dollars the charges the companies must pay to local phone carriers for beginning and ending long-distance calls. FCC officials also argued that about three-fourths of the new charges related to the older subsidy programs and had nothing to do with the schools and libraries fund.
The carriers, on the other hand, said they cut long-distance rates after the FCC lowered access charges. To cover increased costs from subsidy programs, they added the surcharges.
More than 30,000 schools and libraries requested $2 billion under the program mandated by the 1996 Telecommunications Act. The FCC has collected a total of $675 million for the subsidies for the first six months of this year from telecommunications companies. None of the money has been disbursed.
Senator Conrad Burns, a long-time Kennard foe and critic of the subsidy program, has proposed a plan that would fund the program in a different way. All five FCC commissioners attending Wednesday's hearing expressed interest in using part of an existing 3 percent excise tax on telephone service to pay for the subsidies. That tax, which dates to 1914, generated $4.5 billion in 1997.
The plan is picking up support among the Montana Republican's subcommittee counterparts. However, Kennard and FCC Commissioner Susan Ness said they did not want to put the subsidy program on hold while Congress considers Burns' plan.
