E-rate funding restarts, but crisis continues

After a nearly four-month hiatus, funding for the federal E-rate program resumed Monday, but the program is still in trouble as new accounting rules threaten to paralyze the financing process.

On Monday, the Universal Service Administrative Company (USAC), the not-for-profit organization that administers E-rate funds on behalf of the Federal Communications Commission, issued 198 letters to schools and libraries, promising funding that totals $23.4 million, said Mel Blackwell, vice president of external communications for the group. Additional letters will be issued once more funds have been collected, he added.

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Such letters are being sent much more slowly than in the past. The result has been widespread uncertainty and frustration among schools and libraries, many of whom depend on E-rate reimbursements to pay for basic Internet services.

Some schools in Alaska actually turned off their Internet service this summer for fear that they would not be approved for funding.

"People are starting to lose confidence in the program because no one seems to know what is really going on," said Gary Rawson, the state E-rate coordinator for Mississippi and chairman of State E-rate Coordinators Alliance. "Some libraries in Mississippi are talking about dropping out of the program, because they can't get the information they need to make responsible business decisions."

The E-rate program, created as part of the 1996 Telecommunications Act, provides funding for public and private schools as well as public libraries to pay for up to 90 percent of technology costs such as wiring and connection fees. Consumers pay for the program through a "universal service" fee on their monthly long-distance telephone bills. Since it began, more than $8 billion has been disbursed from the E-rate fund.

In August, USAC stopped funding the program, pending adoption of new government accounting rules. Under the new rules, USAC must have money in the bank before it can issue "commitment letters" to schools and libraries guaranteeing them that they will be reimbursed.

Previously, USAC was able to issue letters once applications had been reviewed and approved. Because the lag time between issuing the commitment letter and getting the paperwork for reimbursement from the schools and libraries was roughly 12 to 18 months, USAC was able to issue letters throughout the year regardless of whether it had collected all of the money it needed from carriers.

The change in the accounting rules has caused a major backlog in the