Copyright 1999 Federal Document Clearing House, Inc.
Federal Document Clearing House Congressional Testimony
September 30, 1999
SECTION: CAPITOL HILL HEARING TESTIMONY
LENGTH: 4400 words
HEADLINE:
TESTIMONY September 30, 1999 MR. KENT LASSMAN HOUSE COMMERCE
TELECOMMUNICATIONS, TRADE AND CONSUMER PROTECTION SCHOOLS AND LIBRARIES INTERNET
ACCESS
BODY:
Legislative Hearing H.R. 1746 -
Schools and Libraries Internet Access Act Subcommittee on
Telecommunications Trade & Consumer Protection September
30, 1999 Prepared Statement of Mr. Kent Lassman Citizens for a Sound Economy
Introduction "For every old blackboard there are now hundreds of new electronic
computers." So said President Dwight Eisenhower in his televised farewell
address on January 17th, 1961. Of course, this speech is more famous for
Eisenhower's warning to "guard against the acquisition of unwarranted influence,
whether sought or unsought, by the military-industrial complex." His early
recognition of the growing role that technology might play in education seems
even more relevant 38 years later, and informs the on-going policy debate about
the E-Rate. And to paraphrase President Eisenhower's earlier warning about
government power, today we would do well to guard against the acquisition of
unwarranted influence over the technology in our lives by misguided - albeit
well intended - regulatory policy. Mr. Chairman, and members of the Committee,
thank you for the opportunity to share my views on the E-Rate and public
mechanisms to subsidize telecommunications services. I present
these views on behalf of Citizens for a Sound Economy (CSE) Foundation's
members. At CSE Foundation, I am the deputy director for technology and
communications policy.(1) More than a quarter of a million strong, CSE
Foundation's members are in every corner and congressional district of America.
Our members distinguish themselves as policy activists. They constantly remind
us that decisions made in Washington, D.C. are felt in places far away from
here. And that is where CSE Foundation can be found. We fight at the grassroots
level for lower taxes and less economic regulation. CSE
Foundation members are also consumers. They understand from their own personal
experiences how markets and competition - not government regulations - enable
individuals to make better decisions about the products and services they want
and need, including telecommunications services. Public
policies we are here to discuss today should seek to increase, and not limit the
choices, control, and information available to consumers. The E-Rate, and the
taxes collected from consumers to support it, have long been
interests for CSE Foundation. At the most basic level, the E-Rate is a part of a
complex wealth transfer system where the units of value are
telecommunications services. The E- Rate is based upon a policy
that takes from one consumer in order to give to another consumer; the effect is
to distort the marketplace and to be inherently unfair. The legislation before
you today, H.R. 1746, correctly identifies a problem but presents a solution
that would be - at best - a marginal improvement over the current situation.
More likely, it would result in an unfunded entitlement that might actually
limit opportunities for America's children to learn from, and by, using
technology. The Problem Too often policymakers take action based on the
following premise: If not for government action - a new program, a new law or
subsidy - an essential public need will not be met. This premise does not apply
to the infusion of technology and telecommunications into
American education programs. One week ago, on the 23rd of September, the
Associated Press ran a story about a report featured in Education Week that
detailed the prevalence of technology in American schools. All told, there are
5.7 students per instructional computer. 71 percent of our schools use the
Internet in a classroom. It is simply incorrect to claim that computers and
Internet access are not available to our students. Despite its overwhelming size
and the speed by which the E-Rate has grown, growth of technology in the
classroom has not been the result of this federal policy. Looking forward, it is
more likely that local administrators and teachers working with parents and the
local community will make the decisions for what will work in their schools.
This suggests that any subsidy program should have clear goals and should be
phased out upon their completion. A second problem with the E-Rate subsidy is
that it does not address a critical - one might argue the most critical - aspect
of education reform. If the promise of America's future is in her children and
their preparedness for the social, economic, and international challenges of
tomorrow, then we would do well to provide the tools that they will need.
Unfortunately, the E-Rate subsidizes the tools that are easy to provide - not
necessarily the tools that would most add value to our students, society, and
economy. Technology has wrought great change in America. An extensive review of
these changes would not surprise or necessarily inform the members of this
committee. Our jobs, workplaces, leisure, education, and social networks have
responded to the advances of information technology. However, some things do not
change. As much emphasis as we place on what is new and novel, we should also
focus on education fundamentals. Can all of our children read? Do young people
have sufficient writing and logical thinking skills? Are our schools teaching
children to learn how to learn? And most important to the discussion before us
today, is a federal subsidy for telecommunications services the
best use of our resources? Can a computer or an Internet connection teach a
child the habits of the mind to understand basic mathematics and science? Will
tomorrow's workers know how to communicate and think as a result of a new
technology subsidy system today? I suggest to you that a computer is a poor
substitute for concerned parents; a computer is a poor substitute for well-
trained and caring teachers; an Internet connection with high- speed web access
is of little good to a child that cannot read at a basic level. And if the
recommendations that I present today are too challenging, consider the following
thought experiment to help guide your decisions. Would it be better provide your
own child with a mastery of today's technologies without the skills that permit
learning the next set of technologies? Or, would it be better for your daughter,
or your son, to have the skills to maximize her own, or his own, flexibility in
the workforce and in society? Obviously, it is the latter. Children must be
taught how to think critically, to learn on their own, and to communicate with
others. Technology can augment this process. It is not however, a stopgap or
substitute for something else entirely, namely a basic education. The skills
most attractive to employers are not centered on web-browsing. For example,
computer programming requires a solid foundation in analytical skills - basic
mathematics and science. A federal subsidy program for
telecommunications services is the wrong way to address
fundamental education reform. Principles for Reform All of universal service,
and in particular the E-Rate program, is in need of a comprehensive overhaul.
Following are a handful of principles to guide any such effort. It should be
Constitutional. The 1996 Telecommunications Act did not give
the Federal Communications Commission (FCC) the power to establish or increase
taxes. In fact, had the act attempted to delegate that power,
it would be clearly unconstitutional. A power delegated in the Constitution
cannot be re-delegated. This is the starting point of a legal theory called the
non- delegation doctrine. The non-delegation doctrine is not a musty relic from
history. On May 14th, 1999 the 10th Circuit struck down air quality regulations
promulgated by the Environmental Protection Agency (EPA) on the basis that the
agency was implementing regulations not expressly approved by Congress. In
American Trucking Association v. United States Environmental Protection
Agency(2) the court held that without a clear standard from Congress, the EPA
could not constitutionally create and mandate rules and regulations. This need
for a clear statutory standard is consistent with Supreme Court decisions such
as Industrial Union Department v. American Petroleum Institute(3) and J.W.
Hampton v. United States.(4) As in these cases, there is no clear statutory
standard by which the FCC can create or increase taxes to fund
the E-Rate program. If Congress does not administer the E-Rate, then it is
imperative that a clear statutory standard is established to provide guidance
to, and legal authority for, the its implementation and administration. While
the Supreme Court has not ruled on the question of a clear statutory standard
for the E-Rate, a hint of the Court's opinion might be gleaned from the opinion
in AT&T Corp. v. Iowa Utilities Board.(5) Justice Scalia, writing for the
majority, declared that "It would be gross understatement to say that the
Telecommunications Act of 1996 is not a model of clarity. It is
in many important respects a model of ambiguity or indeed even
self-contradiction." It should be limited. Federal support programs for
telecommunications services should be consolidated and limited.
The General Accounting Office has identified 40 subsidy programs to support
telecommunications services. In addition, section 254 (h) (B)
of the 1996 Telecommunications Act requires a discount to be
provided to schools, libraries and the like for the services of a
telecommunications provider. The current administration of the
E-Rate is not limited to telecommunications services as
contemplated by the law. Finally, reform of the E-Rate should include a sunset
provision for the program. Without such a measure, the E-Rate will become an
entitlement that hides and distorts budget decisions in local school districts.
It should be targeted. A subsidy for the needy - students, rural health
facilities, or local libraries - should be targeted to those in the most need.
Pressure to better target the federal largesse of the E-Rate will grow as limits
to the size, scope, and duration of the E-Rate are implemented. It should be
transparent. Section 254 (b) (5) of the 1996 Telecommunications
Act requires that universal service programs adhere to a principle of specific
and predictable support mechanisms. Section 254 (e) of the 1996
Telecommunications Act requires all subsidies to be explicit.
As a result, any reform to universal service - including the E-Rate - must rely
upon a predicable source of revenue that is collected in an open manner from
consumers. The current mechanisms to fund universal service do not meet this
minimal standard. An improvement to this standard would be to require that in
addition to making the costs associated with universal service explicit, the
benefits (and beneficiaries) of universal service subsidies should also be made
clear to consumers. It should be performance-based. Funding for the E-Rate
should be directly linked to the performance of the program. This simple
guideline would create an incentive to limit wasteful spending. If students were
to learn more through additional appropriations for the E-Rate, then the program
would likely thrive. If, however, students did not fare better despite
extravagant expenditures for E-Rate funding, then America would be best served
by spending those precious dollars on a more effective education program. In
addition, this principle creates a means through which the merits of the program
- if they exist - will be justified by an honest taxpayer assessment. A
significant problem with funding a government program through an excise
tax - either alone or funneled through a trust fund - is that it
divorces the results of a program from the source of the revenue. Consider that
as consumers spend more money on telecommunications services
the amount of funding for the E-Rate will continue to climb regardless of need
or efficacy of additional revenues. An assessment by taxpayers - most often
through the Congressional oversight process - requires objective measures of
success. Currently, we measure the amount of money that goes into the E- Rate
program. However, it would be more helpful to know how much of the multi-billion
dollar E-Rate program makes it into the classroom versus being spent on
administrative costs. Is web access as good of a teaching tool as a local area
network run by teachers trained in HTML? Does this question produce different
answers at different grade levels? These questions, and not numbers about the
quantity of applications for federal aid, would do more to help understand the
merit and performance of this federal subsidy. In turn, better information about
the performance of federally funded program can translate into a better use of
scarce resources. Reforming Reform: H.R. 1746 Common wisdom suggests that unless
Congress, or the FCC, steps into the marketplace with a tax and
regulatory system then our schools, libraries, and rural health care providers
will not have adequate telecommunications services. If that
were true, and if a federal subsidy were introduced, then we would certainly
attempt to design the most efficient system to administer that subsidy. H.R.
1746 is a step toward a better subsidy system that the current E-Rate program.
However, this proposed legislation can be significantly improved. The principles
outlined above should guide any effort - including the development and
refinement of H.R. 1746 - to reform the E- Rate program. Following are only a
few examples of where this legislation can be improved. - People use the
Internet. Students, library patrons, and rural health care professionals are not
the direct beneficiaries of the E-Rate. H.R. 1746 would make resources available
to states, not to schools and certainly not to students. The closer a subsidy is
moved to the ultimate beneficiary, the better and more accountable the subsidy
system. - The sunset provision in H.R. 1746 is very important. It, however,
could be improved by repealing the remainder of the federal excise
tax on telecommunications at the same time that the
proposed trust fund expires. This excise tax was introduced to
fund the Spanish-American War. The war lasted approximately three months and
ended more than 100 years ago. It is time to get rid of this
tax. - By definition, a program funded by an excise
tax is poorly structured. The excise tax - a
tax on talking - should be repealed and the E-Rate should be
funded out of general revenues. This structural change to H.R. 1746 would
strengthen the proposal to reform the E-Rate. - A criterion such as "living in a
sparsely populated area" is not the same as an area in need of a subsidy. For
example, some rural areas may be served by wireless
telecommunications services at a lower cost - and therefore
lower need for subsidy - than traditional landline services. A change of
perspective from rural to high-cost would better target the resources made
available by the E-Rate program. - H.R. 1746 sends unexpended balances in the
trust fund to the general treasury. At the same time, consumers are led to
believe that the telecommunications taxes that they pay are
putting computers in a classroom. Taking money for one purpose, putting it in a
trust fund, and then spending it on another purpose is not good public policy.
It is dishonest. Instead, any subsidy program should be funded out of general
revenues, where it would have to compete with other priorities. If this change
is not made, at the very least, unexpected balances should be returned to
taxpayers, and not shifted into an already-bloated federal budget. Conclusion
This impetus behind H.R. 1746 is well-intentioned. The current E- Rate is a case
study in government waste, fraud, and abuse. However, the proposed reforms
contained in this legislation should not go forward without substantial
improvement based on the principles outlined above.. As we move forward, I trust
that we will heed the warning of President Eisenhower to "guard against the
acquisition of unwarranted influence, whether sought or unsought." Thank you.
LOAD-DATE: October 4, 1999 
