Analysis

Sponsor: Senator Stille & Representative Schauer
Subject: Discounted telecommunications services for schools and libraries
Position: The Department and the Commission support the bills.

Problem: In February, 1996, Congress enacted the Federal Telecommunications Act of 1996, Pub. L. 104-104, 1 10 Stat. 56. The law requires the Federal Communications Commission (FCC) to adopt a program of discounts for interstate telecommunications services provided to schools and public libraries. The law further requires the several states to adopt similar programs for intrastate services.

On May 8, 1997, the FCC adopted its rules for the schools and libraries interstate discounts. The rules require states to adopt, at least, the same program for intrastate services as adopted for interstate services in order to receive any federal support.

In most states, the state public utility commission has authority to set rates, and to administratively adopt the price discounts. Under the terms of the Michigan Telecommunications Act, however, the rate-setting authority of the Michigan Public Service Commission is substantially limited, and many services covered by the schools and libraries program are not subject to any economic regulation. It is questionable, therefore, whether Michigan can avail itself of the federally-provided discounts via administrative action.

Description of the Bill: The bills eliminate any concern regarding PSC authority to adopt discounts. They simply require all intrastate telecommunications providers to participate in the discount programs, at the same level, as adopted by the FCC for interstate services. SB 637 addresses discounts for schools, and HB 4997 addresses discounts for libraries.

The FCC-adopted program provides for discounts ranging from 20% to 90%, depending upon the relative poverty of the school district in question. All public, and private non-profit, elementary and secondary schools (with endowments of less than $50 million) are eligible to receive the discounts. Public libraries are eligible for the same level of discounts.

Discounts are provided for all commercially available telecommunications services, internal connections, and access to the Internet. Schools and libraries are encouraged to join in consortia to increase their bargaining power to obtain the lowest possible pre-discount price.

Eligible schools and libraries must have a state-approved telecommunications technology plan to qualify for the discounts. The state Department of Education and Library of Michigan are taking the lead to assist in meeting this requirement.

Rules: No new PSC rules are necessitated by the bills. No existing rules need be altered.

Fiscal Impact: There could be a substantial impact on the budgets of schools and libraries, much of which is provided by State funding mechanisms. Eligible schools and libraries will pay less for existing telecommunications services, and will be able to purchase more advanced telecommunications capabilities.