The Great Clinton Telecommunications Giveaway

October 29, 1996 • Commentary

President Clinton has called on the Federal Communications Commission to institute an “E‐​rate” to give free basic Internet service along with subsidized high‐​speed access and other advanced Internet services to all elementary and secondary schools and libraries in the country.

This is not a new suggestion. In spirit, it is embodied in the Telecommunications Act of 1996, which mandates discounted telecommunications service for K-12 education, libraries and rural health institutions. It also contains a provision for a National Education Technology Funding Corporation.

On Nov. 8, a joint board made up of state and federal regulators and a consumer advocate, but no industry representatives, will report to the FCC about this and other “universal service” issues. The board will probably recommend something very like what Clinton has in mind.

Such a proposal is likely to become part of an FCC mandate on the telephone companies in 1997, and it will inevitably be greeted by a chorus of cheers from the education lobbyists, who will claim that this is just further evidence of how much the Clinton administration cares about children.

There are only two things wrong with the E‐​rate proposal: It makes no economic sense, and it may be unconstitutional.

The economics of the E‐​rate are dubious, because its advocates have not shown any real benefits relative to costs of Internet access for schools and libraries. If they can get the E‐​rate into the FCC regulations, they will never have to.

The Internet can bring new sources of information to schools, allow access to resources in geographically remote locations, provide e‐​mail contact for collaborative work by students and even provide e‐​mail contact between teachers and parents.

That is truly wonderful. But is it worth the cost relative to, say, books?

There are estimates that place the objective cost — leaving aside the delicate matter of who pays — for providing interconnection of all schools and libraries at around $10 billion. If educators were given such an enormous sum of money to spend on schools, would they really spend it all on the Internet? Do they have such faith in the educational resources in cyberspace?

And, of course, the E‐​rate proposal doesn’t actually make communications services free. It merely transfers the cost of providing Internet services for schools to the telephone customer, which is just about all of us.

This is in the time‐​honored tradition of politicians’ rewarding certain constituencies with funding that, when divided among the rest of us, appears to be trivial on a per capita basis, so that there are no outcries from the general public.

In this case, the favored groups are Democrat‐​leaning lobbyists for the teachers and librarians, who have long wanted to play with the Internet at the public expense.

The government has subsidized education in this country for many years by using taxpayers’ money to pay the bills of educational establishments. But suppliers of books, desks, pens and paper to schools get paid, just as they do when selling to the private sector.

No one has yet proposed that book companies should supply books to schools as part of their public duty. But the equivalent is being proposed for the telephone companies.

The Bell system did have a public‐​service mission and carried it out in return for guaranteed profits. Today, the telephone companies are moving toward a new system in which they compete against each other for consumer dollars. In this new climate, surely there is no more reason to impose a special social mandate on the telephone companies than on any other firm.

This raises a constitutional issue. For the government to insist on free service for schools and libraries might be considered a taking under the Fifth Amendment.

That is an interesting possibility, because, as it happens, the local telephone companies are currently using the takings clause to challenge the FCC’s interpretation of the part of the 1996 Telecommunications Act that requires them to interconnect their networks to those of their competitors.

However, challenging a technical issue such as interconnection has relatively little potential for creating public‐​relations problems. Risking insults from the powerful education lobby will take more courage.

Let’s hope the telephone companies have the guts to take this route.

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