A r c h i v e d  I n f o r m a t i o n

    At this critical juncture, the Joint Board has an opportunity to articulate a public policy that will shape access to telecommunications and information services for the coming century. Recently, Representative Edward Markey (D-MA) and Senator Byron Dorgan (D-ND), together with U.S. Education Secretary Richard Riley and Larry Irving, Assistant Secretary for Communications and Information at the Department of Commerce, advanced the concept of an "E-rate" applicable to basic telecommunications services for schools and libraries. This "education rate" would guarantee a free package of basic telecommunication services to every school and library in America. In addition, discounted rates for access to other services used for "educational purposes" would be established.

    On June 29, 1996, Vice President Gore stressed that affordable connections to information networks available today and in the future are an essential part of the Administration's comprehensive initiative on technology literacy. He called upon state and federal regulators to implement the vision of the Telecommunications Act to ensure the availability of affordable, universal access to the tools of the Information Age.

    On behalf of the Administration, the National Telecommunications and Information Administration (NTIA) at the Department of Commerce, the Departments of Education and Agriculture now offer guiding principles for and an approach to establishing discounted rates for schools and libraries that we believe further the goals of the Act and will ensure that the vision of the E-rate proposal becomes a reality. We recommend that the Joint Board endorse the E-Rate concept and adopt the framework we present below.

    In fashioning new universal service policies for schools and libraries, the Commission and the States must ensure that those policies are consistent with the Act's mandate to foster meaningful competition in every segment of the telecommunications marketplace in all U.S. jurisdictions. The Administration's E-rate proposal seeks to fulfill the mandate of section 254(h) of the 1996 Telecommunications Act, by melding a competitive bidding model with a basic package of telecommunication services that would be universally available to all schools and libraries. The plan's system of discounts would be applied on a tiered basis, with a credit feature allowing for the most flexible use.

    Most fundamentally, the E-rate plan would seek to ensure an initial deployment of basic telecommunications and information capabilities to all schools and libraries that would be integrated with the curricula and research skills needed for success in the next century. The first-tier discount would apply to K-12 schools and libraries as directed by the Act. The basic package would enable schools and libraries to gain access to services at no cost to them and would include basic connectivity and Internet access, at adequate transmission speeds.

    Calculation of the cost of the basic package for a school or library should be based on prices or economic costs, including a reasonable profit margin, that approximate a competitive result. While the basic E-rate package would be free to a school or library, competitive bids would be used to help determine the amount reimbursable from the universal service fund (USF) to the winning carrier.

    Beyond the basic package of services, other services would be discounted less than 100%. These services could conceivably encompass any offering of telecommunications service providers other than basic connectivity and Internet access. The service provider would receive the basic package credit applied against the total purchase of special and advanced services if the school chose not to take the basic package. For the non-basic package services, the bids, constrained by a "best value" ceiling, would serve to substantially reduce the price a school or library would pay but would not generally be reimbursed from the USF; the fund would be tapped only for high-cost and low-income areas.

    For high-cost or low-income schools or libraries, a further discount would be applicable. The discount for a given school or library could be based on an affordability index whereby these institutions would receive greater price reductions. Rural locales comprise a disproportionately large percentage of high-cost areas. The amount of the discounts for high-cost and low-income areas would be properly covered by the USF.

    The workings of the marketplace, coupled with a variety of public-private partnerships for training, hardware, content, and technical support, should help meet the Administration's goals of connecting all schools and libraries by the year 2000. Contributions -- whether donations of new or surplus system, free software, NetDay internal connections, volunteer training or technical assistance -- would complement the E-rate. Moreover, market opportunities can be realized by users as well as suppliers; banding together in buying coalitions, schools and libraries can produce even greater volume discounts and scale economies benefiting all concerned. In addition to the importance of contributions and market opportunities, sustainability should be fostered due to the attractiveness of both "total-package" and volume sales for providers as well as the new capabilities afforded students, teachers, librarians, and their patrons through procurement of Information Age capabilities.

    Integrating education and functionalities is pivotal. Educational objectives and curricula should properly drive the use of bandwidth, transmission speed, and other functionalities. The Administration also recommends that the E-rate and USF approach be revisited by the Joint Board and the FCC every three years or sooner if requested by bona fide petitions. During these triennial reviews, policymakers should solicit views from all stakeholders in the educational system to ensure a dynamic process.

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[Letter to the Honorable Reed E. Hundt]

[A Plan to Implement the E-Rate]