Senate Commerce Committee Co-Chairmen Ted Stevens (R-Alaska) and Daniel Inouye (D-Hawaii) have scheduled a Full Committee hearing on Monday, April 11, 2005, at 2:00 p.m., in SR-253 on S. 241, a bill to exempt the Universal Service Fund from sections of the Anti-deficiency Act.
Chairman Stevens Remarks at Senate Commerce Committee Hearing on S. 241, The Universal Service Fund Exemption from Anti-deficiency Act Monday, April 11 2005 - 2:00 PM - SR-253
We convene this hearing to examine Senate bill 241, a bill to permanently exempt the Universal Service Fund from the Ant-deficiency Act. At the end of last session, Congress had to move quickly to pass a one-year exemption from the ADA to prevent further disruption to the E-rate program. Given that we’ve only passed a temporary exemption last year, it’s our feeling that we must now look at how we can permanently fix this problem. The witnesses are Austin Schlick, the Acting General Counsel of the FCC; Lisa Gel, the Deputy Bureau Chief of the Wireline Competition Bureau of FCC; Brian Talbott, Chairman of the Board of the Universal Service Administrative Company; Patricia Dalton, Managing Director of Physical Infrastructure Issues, GAO; Sheryl Abshire, District Administrative Coordinator of Technology of Calcasieu Parish Public Schools of Louisiana; and Steve Hamlen, President and CEO of United Utilities. Let me yield to my colleague, the Co-Chairman.
Just a little bit of history, so we can go back on this. When Senator Inouye and I came to the Senate – he was here first – all advertisements about communications said these rates do not apply in Alaska and Hawaii. The rate – I don’t know what the rate was paid to call Hawaii at that time – but my allowance gave me the right to so many minutes of telephone calls to Alaska at the rate of $5 a minute. We saw that the development of long-distance rate averaging pools in the South-48 – that’s what we call the continental 48 – and my colleague and I joined together to ask Congress to approve a resolution requesting the telephone industry to integrate rates so that it included Alaska and Hawaii. That process started voluntarily by the industry and the Universal Service Fund began there. That was a fund totally organized by the industry, collected by the industry, and expended by the industry. Before the 1996 Act, the FCC at one time decided that they ought to take over the management of this Fund and I objected to that and called the GAO and asked them to investigate the matter. And, they did decree that that Fund was not subject to FCC control because it was totally an industry fund collected voluntarily and administrated by the industry.
Senator Snowe and Rockefeller, in connection with the ’96 Act, decided to mandate that that Fund should go and be allocated, in addition to just bringing long-distance service to rural America, particularly to the offshore States, and I think wisely the two of us joined Senators Snowe and Rockefeller in this, to mandate the concepts of serving schools, libraries, and health facilities. Following that, the FCC in its own judgment decided to mandate the creation of this corporation, which Mr. Talbott is now the Chairman of. It’s the best example I know of an agency trying to pull itself up by its bootstraps and then choking off the subject of its jurisdiction. This has been the result of the determination that the ’96 Act mandated the creation of that Corporation, which it did not. Now we’re faced, and were faced last year, with the problem of what to do about the decisions of the FCC, as confirmed by the GAO and I think urged by the OMB to start total Federal control of this money. It is still collected by the industry. The amount of money collected is capped by a decision, I believe of the FCC.
You heard the testimony here and I think there’s absolutely no question, that the Snowe-Rockefeller Amendment brought about a substantial change in America. It made available to rural schools, rural communities the intertie that tele-medicine, tele-education, tele-conferencing, has brought. It has brought communities together, although they are stretched out, as Mr. Hamlen said, to 250,000 square miles. That is a community in Alaska all working together to provide the services that are mandated by the Snowe-Rockefeller amendment. We are faced with a real problem and I appreciate for myself the suggestion that we take some time to try and figure out what is a solution. The two years I don’t think is long enough, however, Ms. Dalton. I think the Congress takes a lot longer than that to make up its mind. We’ve seen that in connection with our problem of dealing with the Arctic National Wildlife Refuge – 25 years and it still hasn’t made up its mind. So, as far as I’m concerned, we need a little more time than two years and I’m not sure we can get a solution right now. I’m not sure that we really have the ability to decide how to deal with these other laws, which are not within the jurisdiction of this Committee. The only thing we’ve got the right to do, I think, is suspend the application of those laws for a while until we can get the other legislative committees to work with us and agree with us that we need to find a solution on how to manage this money. From my point-of-view, Mr. Talbott has mentioned one of the real serious problems and that is the telecommunications industry has wisely invested this Fund in the past. It has leveraged the collections they’ve made, so that they really have appreciated considerably in terms of the amount of money that’s available to carry out the services that they’re now mandated to do. That leveraging factor has been lost under the decisions that have been made by the FCC and GAO and the OMB. I have a couple of questions to ask and let me say to my colleagues, Senator Inouye and must go and manage the defense portion of the Supplemental bill at three o’clock, so we intend to ask our questions and then leave. And, I hope Senator Snowe that you will be able to stay and Senator Rockefeller will stay and conduct the hearing for us, for the Committee. I consider this to be one of the major issues before this Committee in terms of communications this year. The solution may be temporary, but it’s going to be very important somehow to find a way to not not lose the capabilities that have been brought to rural America and to our states, our two offshore states, by the Snowe-Rockefeller Amendment.
Questions and Answers:
Chairman Stevens: So, let me ask, I apologize for that long monologue, I have several rather quick questions. One is, Mr. Talbott, what’s the current balance of this Fund and how much will be offset by the funding commitment decision letters that you have issued?
Mr. Talbott: It’s about $3 billion in the Fund, I can check my notes, but about $2 billion is currently committed.
Chairman Stevens: So, unless we do something by the time you hit the fall, we’re going to be in trouble.
Mr. Talbott: Correct.
Chairman Stevens: Is it true that there are over commitments to the program and how does that come about and why?
Mr. Talbott: A couple of things happen. The process that the school districts and libraries go through takes some time. Technology dollars, if we look at it across the board come down. The cost for technology has come down so there is a gap in the technology that schools are putting in – what they’ve requested and then they make those adjustments as they move forward because the vendors will give those adjustments to the users – that’s part of the problem.
Chairman Stevens: Is it true that the more you commit, the more is scored against this bill, against your function.
Mr. Talbott: I don’t understand the question, Senator.
Chairman Stevens: Maybe the FCC – the scoring is affected by over commitments, right?
Mr. Schlick: I can’t speak specifically to scoring, but in terms of the obligations, yes. The commitment letters constitute the obligations and therefore its the issuance of the commitment letter, rather than the eventual disbursement, which occurs sometime later.
Chairman Stevens: Well, let me ask this of the FCC, is there a way to change the commitment letters to avoid the accounting problems we find that have been outlined here?
Mr. Schlick: That is an option that has been considered, yes Mr. Chairman.
Chairman Stevens: Can it be done without legislation?
Mr. Schlick: Yes, those letters are issued by USAC under the FCC’s direction and they could be modified without…
Chairman Stevens: That would take the Commission’s concurrence, would it not? To change the rules?
Mr. Schlick: It’s one of the functions of USAC under our supervision, yes.
Chairman Stevens: And that would be subject to a series of hearings and procedures under the FCC? In other words, it will take time if we opted to go that direction it will take time? How long will that normally take to have a rule changed by the FCC?
Mr. Schlick: Mr. Chairman, that’s not in the Commission’s rules now. It would be a matter of consultation between USAC and the FCC staff, which supervises USAC’s operations on a day-to-day basis.
Chairman Stevens: But, wouldn’t it involve a public process to determine how the rule was issued by the FCC?
Mr. Schlick: Mr. Chairman, right now, the USAC commitment letters are not enshrined in…
Chairman Stevens: The accounting change I’ve suggested, wouldn’t that take a rule?
Mr. Schlick: The accounting change, yes. The application of gov-gap, which is the accounting rule made in October 2003, the Commission extended to use that, that would require a change of FCC rules. But, it’s important to know, Mr. Chairman, that the accounting procedure is one that identifies the timing of the obligations. The rule that USAC must have cash on hand…
Chairman Stevens: I’m more interested in the time it would take to do it. I’m talking about Ms. Dalton’s problem. How long do we need if we need a temporary fix? How long do we really need if we decide to go that route?
Mr. Schlick: That rule change would not affect the Anti-deficiency Act problem, Mr. Chairman because the Anti-deficiency Act problem is one that is statutory. The gov-gap procedures are a tool that identifies that time the obligations accrue, but it does not, there is nothing the Commission could do.
Chairman Stevens: Avoiding the accounting problem would not solve the issues I’m discussing, right?
Mr. Schlick: That is correct, Mr. Chairman.
Chairman Stevens: Mr. Hamlen, in terms of this as it affects our State, what would be the impact on your total operation if the exemption is allowed to expire and Congress does not act.
Mr. Hamlen: First of all, our customers, our school districts, our rural health care providers would all be impacted. The impact on our company would be severe. Our ability to continue to deliver these services would be undermined and our ability to build-out new infrastructure would also be undermined. In fact, if that were to happen, we would probably within a year, have to go out of business.
Chairman Stevens: Last comment – by virtue of the investments you’ve made in the past, Mr. Talbott, investments of the surpluses as it has occurred temporarily, has that been a factor in the ability to keep the contribution level as low as possible?
Mr. Talbott: Yes, it has.
Chairman Stevens: It’s up to about 11 percent now, isn’t it?
Mr. Talbott: That’s correct.
Chairman Stevens: And, technically paid by long-distance carriers primarily, right?
Mr. Talbott: Correct.
Chairman Stevens: Sentor Inouye.
Daniel K. InouyeSenator
Mr. Chairman, I want to thank you for holding this hearing to examine the need to exempt the Universal Service Fund from certain accounting provisions of the Antideficiency Act. I am pleased to cosponsor S. 241 with you, Senators Snowe and Rockefeller, and many others on this committee.
The Universal Fund has been a critical tool to bring technology. Since the enactment of the Communications Act of 1934, Congress has long-supported the core belief that telecommunications services should be available to all Americans at reasonable rates. Through the Telecommunications Act of 1996, we reaffirmed our commitment to the principle of universal service and ensured that the definition of universal service would be sufficiently flexible to capture “an evolving level of telecommunications services” so that rural and low-income areas are not left behind as technology continues to advance. While I am committed to addressing issues concerning the sufficiency, stability and viability of the Fund, today, we will focus on the importance of exempting the Universal Service Fund from the Antideficiency Act.
Schools, libraries and rural health care providers in all of our states rely on funding from the USF annually. The State of Hawaii alone has received over $27 million from the E-rate and Rural Health Care programs since they were created under the Telecommunications Act of 1996.
However, everyone on this Committee remembers very well the events of last year. While lawyers and policy makers in Washington argued about accounting rules and antideficiency requirements, schools, libraries and rural health care providers across the country were faced with the dilemma of shutting down or delaying deployment of innovative educational and medical services because of unreliable funding.
For many people in the affected communities, losing access to these services would have meant losing opportunities to change, enrich, and improve their lives. With your leadership Mr. Chairman, a temporary fix was enacted during the closing days of session last Congress, which permits commitments to be made to eligible entities until the exemption expires on December 31, 2005. We must act now to ensure that future disruptions to these critical programs do not occur.
I want to be clear. Congress must act to ensure that schools, libraries, and rural health care providers continue to receive this funding in a timely and predictable manner. I believe that enacting a permanent solution must be one of our highest priorites this session. Technology is transforming how we receive and share information, and in turn, it is empowering people to change their lives and the life of their communities. Access to the Internet is the encyclopedia of the twenty-first century, and I, for one, will not allow our young people to lose that access.
I look forward to the testimony of the witnesses before us on the Universal Service Fund and the issues relating to the Antideficiency Act. However, it seems that we are missing a critical perspective at the table - the Office of Management and Budget, which has raised concerns with this legislation. We would like to have a full record and I am disappointed that OMB is depriving us of their important perspective on this matter.
Mr. Chairman, this is a very serious matter and we must work hard to find a solution. I commit to working with you and our colleagues to move this legislation through the Congress. Thank you.
Witness Panel 1
Mr. Steve Hamlen
Mr. Austin SchlickActing General CounselFederal Communications Commission
Ms. Sheryl AbshireDistrict Administrative Coordinator of TechnologyCalcasieu Parish Public Schools
Ms. Patricia A. DaltonManaging Director, Natural Resources and EnvironmentU.S. Government Accountability Office
Mr. Brian TalbottChairman of the BoardUniversal Service Administrative Company