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Hearing of House Subcommittee on Oversight and Investigations - Problems with the E-Rate Program: GAO Review of FCC Management and Oversight

Location: Washington, DC


March 16, 2005


Ms. Blackburn. Thank you, Mr. Chairman, and thank you to each of you for being here today. We have been interested to read your testimony and interested to have you here with us. And Director Goldstein, I think I will begin with you, if you don't mind.

From my time I served on government reform, I have come to really appreciate you guys----

Mr. Goldstein. Thank you very much.

Ms. Blackburn. [continuing] and the work that you. You all have indicated that there may be 35 programs--or at least 35 other programs that provide funding for technology in schools and that this funding could move as high as $12 billion. Is that correct?

Mr. Goldstein. Are you referring to an older report of ours? Are you----

Ms. Blackburn. Yes.

Mr. Goldstein. Yes. This is----

Mr. Blackburn. Okay.

Mr. Goldstein. In a report that we issued a number of years ago, that is correct.

Ms. Blackburn. Okay. Great. Have any of these other programs had the financial problems that E-Rate has?

Mr. Goldstein. I am not sure that we have tracked them since then, so I think it is pretty difficult for us to tell. This is a report that was issued some time ago about other kinds of programs. And obviously, they have, no doubt, changed over the years, so I would hesitate to characterize what kinds of problems they may have today. Whether they had problems at that time, obviously, is another issue; but we haven't tracked them in a way that would help us to answer that question.

Ms. Blackburn. Okay. So you have not tracked the effectiveness of those programs?

Mr. Goldstein. No, ma'am.

Ms. Blackburn. Okay. Is it too much for me to ask if you would respond to me on those programs and the financial management of those programs so that we will know what is still in effect? I see the individuals who are with you and seated behind you kind of nodding their heads----

Mr. Goldstein. I hope they are nodding their heads, yes.

Ms. Blackburn. [continuing] making some comments, and I think that would be helpful to us.

Mr. Goldstein. We will be appy to get back to you and to figure out how we can----

Ms. Blackburn. That would be great.

Mr. Goldstein. [continuing] help you with that.

Ms. Blackburn. That would be great. I think as we look at E-Rate that that would be helpful to have that information because if there is a way to begin to measure some effectiveness moving forward, I think it would serve us well.

Another thing on E-Rate, funded, primarily, through the Universal Service Fee, and that is capped at $2.25 billion per year. And the tax started out at 3 percent in 1998 and is now at 9 percent. Is that correct?

Mr. Carlisle. May I?

Ms. Blackburn. Yes. Go ahead, please, Mr. Carlisle.

Mr. Carlisle. It is actually, for the first quarter of the year, it is at 10.7 percent.

Ms. Blackburn. 10.7? Thank you for that. That is important. I have just left a telecommunications subcommittee hearing, and you know, as we look at the Telecom Act, I think that applies to us.

Okay. Mr. Goldstein, to you again: does the FCC's administration of the E-Rate program comply with the FFMIA?

Mr. Goldstein. One of the things we are trying to ask FCC to do is to go back and look at the various financial laws and make that determination. We are not in a position to specifically determine----

Ms. Blackburn. You are not? Mr. Carlisle, I saw your interest peaked a bit by that question. Do you have an answer for that one?

Mr. Carlisle. I believe the Office of the General Counsel made a determination and communicated in a letter--and I am going to forget exactly to whom it was sent--but it made a determination in 2000 the FFMIA did apply to the fund.

Ms. Blackburn. And do they comply?

Mr. Carlisle. We have no reason to believe they are not in compliance.

Ms. Blackburn. Okay. Great. Wonderful. And Mr. Goldstein, another one for you.

Going back to all of the programs--let me loop this back into my first question, going back into the technology funding. With the 35 programs that have been in existence--as you respond to me on that, I would like to know--we are looking at waste, fraud, and abuse, and we are looking at where our opportunities for savings exist. I would like to know how much efficiency could be gained if you were take all 35 of these various and sundry programs with the different--probably different levels of effectiveness, and if they were rolled and consolidated into one program--more or less what our administrative savings would be and what we could gain from that oversight, what we could address through rules, what we would need to address through legislation. So that would be helpful.

Mr. Goldstein. We would be happy to take a preliminary look, come talk to you and your staff, and see what we can do from there.

Ms. Blackburn. Okay. That will be great.

Mr. Carlisle, has the FCC consulted with school and libraries on the programs' goals and measures of those goals? And what ought to be done next with the program, now that 90 percent of the schools are--they have connectivity.

Mr. Carlisle. Usually the way that we interface with the schools and libraries is through the notice and comment process, when we are adopting rules related to the program, and so we do always have the opportunity to get input from them. We also have regular calls--my staff has regular calls with the national coordinating bodies for schools and libraries participating in the program. So we do have the opportunity to talk to them about the goals of the program and how they change, and we are looking forward to receiving further comment from them as we continue to modify the program.

Ms. Blackburn. Will E-rate have outlived its usefulness when we see most of the service going wireless?

Mr. Carlisle. Well, certainly, that may be, in some cases, a more cost-effective way of providing broadband to schools, as opposed to running actual wires out to schools located at a distance. Now, it may be that even it is more cost effective, it may be very expensive for some schools to actually buy that equipment; there may still be a gap between what the schools are able to pay and what the technology costs. So I would hope, that as technology becomes more ubiquitous and cheaper over time, you would see less of a need for extremely high funding requests for equipment, over time. But is a valid question; as we do reach a level of--for example, 94-percent penetration of broadband services to schools--how should the funding program change? Should it become more targeted? Should we be looking at more cost-effective technologies? And we have solicited comment on some of those issues; we hope to solicit comment on more of them very soon.

Ms. Blackburn. Do you feel that, even with these other 35 funding programs that have been there over the past decade, do you think that the E-rate Program is the main reason or the primary cause of most of the schools in underserved areas being connected to the Internet?

Mr. Carlisle. Well, I think if you look at where the U.S. was in--say for 1999--or 1998, I believe, the numbers stood at something like somewhere under 60 percent of the schools were connected to the Internet. Now, it is 94 percent. Do I believe that the program had a--that amount would have gone up over time. There is no question. I believe the program, however, did certainly--it must have had an impact in term of accelerating the deployment of broadband to these schools. Now, GAO has appropriately raised the issue that our performance metrics didn't serve to measure that difference, and we are trying to come up with that.

Ms. Blackburn. Mr. Goldstein, would you like to comment on that?

Mr. Goldstein. Thank you. I think Mr. Carlisle has said it fairly succinctly. While it is certainly true that the number of schools that have been hooked up to the Internet and received other services has obviously increased by various measures, the FCC is unable to tell us how much of those increases are due to the E-rate Program. They were unable to isolate the effect of E-rate funding on connectivity in their performance measures because they did not have those measures in place or any ways to validate them. So that is the case today.

Ms. Blackburn. All right. Thank you.

Mr. Carlisle, has OMB done a PART analysis on the E-rate Program?

Mr. Carlisle. Well, we have gone through the process with them, I believe, last year, and I believe last year they said that, as part of their PART analysis, that we did not have--they could not make a judgment that the program was effective because we didn't have performance measurements. After that, we started working with them very closely and have been working with them in order to develop new management and also program-performance metrics.

Ms. Blackburn. So they rendered it ineffective, and you all are taking steps in what timeline? What is your timeline for bringing it into a compliance or up to a certain level of effectiveness?

Mr. Carlisle. I believe we will have a set of metrics within the next few months brought together, certainly by the end of this fiscal year. Because of the way the PART process operates, I believe they will actually be used by the agency in fiscal year 2007, which is in our response to the GAO report.

Ms. Blackburn. So your timeline, then, would bear out that you would have a compliance by 2007.

Mr. Carlisle. We would hope so, yes.

Ms. Blackburn. Thank you. My time has expired. Thank you, Mr. Chairman.


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