Court Upholds Net Subsidy Program

A federal appeals court on Friday upheld a $2-billion annual federal program to subsidize Internet connections for schools and libraries.

The U.S. 5th Circuit Court of Appeals backed the Federal Communications Commission’s decisions to allow the subsidies to be used to pay directly for Internet access as well as needed internal wiring at schools and libraries.

Major telephone carriers such as GTE Corp. had argued that the money could only be spent on telecommunications services.

Thousands of schools and libraries across the country have been connected to the Internet thanks in part to the program created in the 1996 Telecommunications Act and known as the education rate, or e-rate.

Last year, the e-rate, which has been closely associated with Vice President Al Gore, handed out $1.7 billion to almost 26,000 school and library districts. This year, the FCC set funding at $2.25 billion.

But Republicans in Congress and some local telephone companies complained that the e-rate, paid for mostly by levies on consumer long-distance bills, was never intended to cover non-telecommunications services or internal wiring.

In Friday’s decision, a three-judge panel of the New Orleans-based court rejected those arguments, finding that the FCC had acted properly and within the 1996 law’s sometimes murky constraints.

“Although we agree with GTE that the statute and its legislative history do not support the FCC’s interpretation, the language of the statute is ambiguous enough to require deference,” the court wrote in an opinion released late Friday.

FCC officials were quick to praise the court. “Today’s ruling validates the FCC’s decision to connect all of America’s schools and libraries to the Internet through the e-rate and is a victory for America’s children,” FCC Chairman William Kennard said in a statement.

The agency was still evaluating the decision and “studying its implications for further FCC action,” Kennard said.

A GTE spokesman declined to comment, saying the firm’s lawyers were still analyzing the ruling.

The court also largely upheld the FCC’s massive 1997 efforts to reform the larger system of federal subsidies used to keep basic telephone service affordable in rural and low-income areas.