The Great Clinton Telecommunications Giveaway

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President Clinton hascalled on the Federal Communications Commission to institute an"E-rate" to give free basic Internet service along withsubsidized high-speed access and other advanced Internet services toall elementary and secondary schools and libraries in thecountry.

This is not a new suggestion. In spirit, it isembodied in the Telecommunications Act of 1996, which mandatesdiscounted telecommunications service for K-12 education,libraries and rural health institutions. It also contains aprovision for a National Education Technology FundingCorporation.

On Nov. 8, a joint board made up of state andfederal regulators and a consumer advocate, but no industryrepresentatives, will report to the FCC about this and other"universal service" issues. The board will probablyrecommend something very like what Clinton has in mind.

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

There are only two things wrong with the E-rateproposal: 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 tocosts of Internet access for schools and libraries. If they canget the E-rate into the FCC regulations, they will never haveto.

The Internet can bring new sources ofinformation to schools, allow access to resources ingeographically remote locations, provide e-mail contact forcollaborative work by students and even provide e-mail contactbetween teachers and parents.

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

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

And, of course, the E-rate proposal doesn'tactually make communications services free. It merely transfersthe cost of providing Internet services for schools to thetelephone customer, which is just about all of us.

This is in the time-honored tradition ofpoliticians' rewarding certain constituencies with funding that,when divided among the rest of us, appears to be trivial on a percapita basis, so that there are no outcries from the generalpublic.

In this case, the favored groups areDemocrat-leaning lobbyists for the teachers and librarians, whohave long wanted to play with the Internet at the publicexpense.

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

No one has yet proposed that book companiesshould supply books to schools as part of their public duty. Butthe equivalent is being proposed for the telephonecompanies.

The Bell system did have a public-servicemission and carried it out in return for guaranteed profits. Today,the telephone companies are moving toward a new system in whichthey compete against each other for consumer dollars. In this newclimate, surely there is no more reason to impose a specialsocial mandate on the telephone companies than on any otherfirm.

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

That is an interesting possibility, because, asit happens, the local telephone companies are currently using thetakings clause to challenge the FCC's interpretation of the partof the 1996 Telecommunications Act that requires them tointerconnect their networks to those of their competitors.

However, challenging a technical issue such asinterconnection has relatively little potential for creating public-relationsproblems. Risking insults from the powerful education lobby willtake more courage.

Let's hope the telephone companies have theguts to take this route.

Lawrence Gasman

Lawrence Gasman is director of telecommunications and technology studies at the Cato Institute.