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24–253PDF 2005

FCC’S E-RATE PLANS TO ASSIST GULF COAST

RECOVERY: ENSURING EFFECTIVE IMPLEMENTATION

HEARING

BEFORE THE

SUBCOMMITTEE ON 

OVERSIGHT AND INVESTIGATIONS

OF THE

COMMITTEE ON ENERGY AND 

COMMERCE 

HOUSE OF REPRESENTATIVES

ONE HUNDRED NINTH CONGRESS

FIRST SESSION

OCTOBER 6, 2005

Serial No. 109–54

Printed for the use of the Committee on Energy and Commerce

(

Available via the World Wide Web: http://www.access.gpo.gov/congress/house

COMMITTEE ON ENERGY AND COMMERCE

JOE BARTON, Texas, Chairman 

RALPH M. HALL, Texas 

MICHAEL BILIRAKIS, Florida 

Vice Chairman 

FRED UPTON, Michigan 

CLIFF STEARNS, Florida 

PAUL E. GILLMOR, Ohio 

NATHAN DEAL, Georgia 

ED WHITFIELD, Kentucky 

CHARLIE NORWOOD, Georgia 

BARBARA CUBIN, Wyoming 

JOHN SHIMKUS, Illinois 

HEATHER WILSON, New Mexico 

JOHN B. SHADEGG, Arizona 

CHARLES W. ‘‘CHIP’’ PICKERING, 

Mississippi, Vice Chairman 

VITO FOSSELLA, New York 

ROY BLUNT, Missouri 

STEVE BUYER, Indiana 

GEORGE RADANOVICH, California 

CHARLES F. BASS, New Hampshire 

JOSEPH R. PITTS, Pennsylvania 

MARY BONO, California 

GREG WALDEN, Oregon 

LEE TERRY, Nebraska 

MIKE FERGUSON, New Jersey 

MIKE ROGERS, Michigan 

C.L. ‘‘BUTCH’’ OTTER, Idaho 

SUE MYRICK, North Carolina 

JOHN SULLIVAN, Oklahoma 

TIM MURPHY, Pennsylvania 

MICHAEL C. BURGESS, Texas 

MARSHA BLACKBURN, Tennessee 

JOHN D. DINGELL, Michigan 

Ranking Member 

HENRY A. WAXMAN, California 

EDWARD J. MARKEY, Massachusetts 

RICK BOUCHER, Virginia 

EDOLPHUS TOWNS, New York 

FRANK PALLONE, Jr., New Jersey 

SHERROD BROWN, Ohio 

BART GORDON, Tennessee 

BOBBY L. RUSH, Illinois 

ANNA G. ESHOO, California 

BART STUPAK, Michigan 

ELIOT L. ENGEL, New York 

ALBERT R. WYNN, Maryland 

GENE GREEN, Texas 

TED STRICKLAND, Ohio 

DIANA DEGETTE, Colorado 

LOIS CAPPS, California 

MIKE DOYLE, Pennsylvania 

TOM ALLEN, Maine 

JIM DAVIS, Florida 

JAN SCHAKOWSKY, Illinois 

HILDA L. SOLIS, California 

CHARLES A. GONZALEZ, Texas 

JAY INSLEE, Washington 

TAMMY BALDWIN, Wisconsin 

MIKE ROSS, Arkansas 

BUD ALBRIGHT, Staff Director 

DAVID CAVICKE, Deputy Staff Director and General Counsel 

REID P.F. STUNTZ, Minority Staff Director and Chief Counsel 

SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS

ED WHITFIELD, Kentucky, Chairman 

CLIFF STEARNS, Florida 

CHARLES W. ‘‘CHIP’’ PICKERING, 

Mississippi 

CHARLES F. BASS, New Hampshire 

GREG WALDEN, Oregon 

MIKE FERGUSON, New Jersey 

MICHAEL C. BURGESS, Texas 

MARSHA BLACKBURN, Tennessee 

JOE BARTON, Texas, 

(Ex Officio) 

BART STUPAK, Michigan 

Ranking Member 

DIANA DEGETTE, Colorado 

JAN SCHAKOWSKY, Illinois 

JAY INSLEE, Washington 

TAMMY BALDWIN, Wisconsin 

HENRY A. WAXMAN, California 

JOHN D. DINGELL, Michigan, 

(Ex Officio) 

(II) 

C O N T E N T S 

Page

Testimony of: 

Feaster, H. Walker, III, Inspector General, Federal Communications 

Commission ................................................................................................... 9

Navin, Thomas J., Chief, Wireline Competition Bureau, Federal Communications Commission ................................................................................... 5

Rawson, Gary, State E-Rate Coordinator, Mississippi Department of Information Technology Services .................................................................... 18

Zaina, Lisa M., Chief Executive Officer, Universal Service Administrative 

Company ........................................................................................................ 15

(III) 

(1)

FCC’S E-RATE PLANS TO ASSIST GULF COAST 

RECOVERY: ENSURING EFFECTIVE IMPLEMENTATION 

THURSDAY, OCTOBER 6, 2005

HOUSE OF REPRESENTATIVES, 

COMMITTEE ON ENERGY AND COMMERCE, 

SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS, 

Washington, DC. 

The subcommittee met, pursuant to notice, at 2:05 p.m., in room 

2123 of the Rayburn House Office Building, Hon. Ed Whitfield 

(chairman) presiding. 

Members present: Representatives Whitfield, Pickering, Walden, 

Burgess, Blackburn, Stupak, and Inslee. 

Staff present: Peter Spencer, majority professional staff; Tom 

Fedo, majority counsel; Jaylyn Jensen, majority professional staff; 

Mark Paoletta, chief counsel; Terry Lane, deputy communications 

director; Jonathan Pettibon, clerk; David Nelson, minority counsel; 

and Jessica McNiece, research assistant. 

Mr. WHITFIELD. I will call this meeting to order, and I apologize 

for just a few minutes delay. Mr. Stupak, his plane was delayed 

coming in from Michigan and we are delighted that he is here. And 

I certainly want to welcome all of the witnesses today. We appreciate your being here. And I will begin the hearing with an opening 

statement, and then we will go to Mr. Stupak, and then we will 

swear you all in and we will go from there. 

First of all, I want to welcome you. Today, the Oversight and Investigations Subcommittee will hear about what is, to this subcommittee, a familiar program, but a program that is about to be 

tasked to operate in an unfamiliar situation. We will find out about 

the Federal Communications Commission’s plans for E-rate Program relief to communities devastated by Katrina. The goal of this 

hearing is to understand what measures can be taken to assist 

those most in need, as they work to recover from this devastating 

storm, and to begin to determine whether such measures, as currently envisioned, can be implemented effectively. 

The effort to supply assistance effectively to Gulf Coast entities 

and families can be equally challenging, especially when working 

in an area with limited records, urgent needs, and where the requirement of speed tests many of the established safeguards 

against waste, fraud and abuse. Our responsibility as members of 

the Energy and Commerce Committee is to oversee the relevant operations in areas of our jurisdiction, to ensure that the necessary 

2

assistance gets to where it is supposed to go and to make a positive 

difference. 

A few weeks ago, the FCC’s chairman, Kevin Martin, proposed 

a number of measures to assist the Gulf Coast rebuilding effort. I 

applaud Chairman Martin for seeking to come to the region’s aid. 

An important piece of this initiative involved plans for the E-rate 

Program, which is the universal service funding mechanism that 

subsidizes telecommunications and certain infrastructure in schools 

and libraries. As Chairman Martin outlined, schools and libraries 

affected by the hurricane would receive relief from the program’s 

standard rules and requirements to assist in the rebuilding or restoration of E-rate covered services. 

We will learn about the status of some of these proposals today, 

and whether the proposed relief is what is needed to meet the 

needs of affected communities as they seek to restore schools and 

libraries. We will also seek to answer some important questions 

surrounding the proposal. For example, what effects will Katrinarelated changes have on other program funding; what new integrity 

challenges will arise; what measures will be necessary to speed 

funding relief, while guarding against the types of waste, fraud and 

abuse this subcommittee identified in hearings over the past year 

and a half? 

With so much funding potentially involved in the Gulf Coast relief initiative, the risk for waste, fraud and abuse is great. This 

hearing is to help ensure that support goes to those who need it. 

The FCC and USAC must do its best to guard against waste, fraud 

and abuse. And we all want this effort to succeed. Yet to do so, the 

FCC and USAC must confront the weaknesses that exist in the 

program, and work to ensure its integrity under the increased pressure from this Gulf Coast relief. 

You know, we are talking about a $2 billion plus program each 

year, and we know from hearings last year that there was some 

concern about some weaknesses in the program and between the 

communication between the FCC and USAC. And without blaming 

anyone, we want to explore ways to improve the program to make 

it its most effective and certainly to explore today how those weaknesses may interfere with this initiate established by Chairman 

Martin. 

We are going to hear from several government witnesses who 

will be essential to the success of the initiative. We will hear from 

the FCC, which sets the rules, and from USAC, the administrator 

of the program, which is responsible for implementing the program. 

We will also hear from the FCC inspector general, who may help 

identify program weaknesses. And finally, we will hear from the Erate coordinator for the State of Mississippi, Mr. Rawson. And I 

would like to extend appreciation to all of you for appearing today, 

and I certainly appreciate Mr. Navin, Chief of the Wireline Competition Bureau at the FCC, for being here today. He has been on 

the job for only 5 months and is currently working, I know, involved in approving one of the largest mergers in telecommunications history, so we know his time is valuable as well. And I already welcomed Mr. Rawson, but we look forward to the testimony 

of all of you today, Mr. Feaster, Ms. Zaina. 

3

And at this time, I will turn it over the ranking member, Mr. 

Stupak, for the purposes of an opening statement. 

Mr. STUPAK. Thank you, Mr. Chairman. I again apologize for 

being a little bit late here this afternoon. But thanks for convening 

this hearing regarding the use of E-rate funds to help the schools 

devastated by Katrina return to Internet conductivity as soon as 

possible. Understand that tomorrow will vote to adopt a staff report 

on the E-rate investigation of the past 2 years. Lessons detailed in 

that report ought to be applied as we rebuild the education infrastructure devastated by the hurricanes. 

Let us be clear, while the FCC press release touts a $132 million 

in E-rate funds as a critical part of the $211 million USF contribution to Katrina rebuilding, it is simply a mirage. All the FCC is 

doing is opening the application window in 2005 and expanding it 

in 2006, with a broad assumption that all schools in the affected 

counties will be eligible for a 90 percent Federal contribution. This 

is important help, but it is merely the reprogramming of funds 

from other schools in the country. This policy will simply take 

money away from schools that were counting on the money and 

planning to implement their programs. 

There is no new money in the FCC’s plan, even though there 

should be funds available without raising the ratepayer contribution. I am afraid this plan is yet another example of the Bush Administration shifting funds from one region of the country to pay 

for Katrina relief effort, leaving some of our schools empty-handed. 

Mr. Chairman, we need details regarding the available funds, the 

shifting of the funds, and the uses of the funds. Yet, today I expect 

that the invited FCC guests cannot or will not comment on the socalled Katrina Relief program because a final order has not been 

implemented. At a minimum, maybe Chairman Martin should be 

testifying today. 

The lessons of fraud, waste and abuse uncovered in this subcommittee’s investigation over the past 2 years should alert us to 

two situations that cry for an oversight plan from the FCC, a plan 

that I hope will but I am sure we probably won’t see today. The 

first involved the lesson of relying too much on the assumption that 

telecommunication companies will always do the right thing. 

In the Puerto Rico case, we learned how Puerto Rico Telephone 

charged the schools $1,500 per month for each of hundreds of T1 lines that they knew, or should have known, were not being used 

because the internal connection and related infrastructure were not 

operable. Still, the carrier rationalized their billing, that they were 

not responsible for the failure of the schools to actually use the T1 lines, even though they were never hooked up. I hope not a single 

telephone bill for Internet or other services has been delivered to 

any schools devastated by the hurricanes. 

Unless the FCC and USAC are vigilant, we may have executives 

claiming that their companies were prepared to provide the services contracted for before the storms, and there is no reason why 

they shouldn’t be paid for now, even if the school was completely 

destroyed by the hurricanes. If that happens, Mr. Chairman, I hope 

you will see to it that they make that argument in this room with 

the TV cameras rolling. 

4

The second class of fraud that should be a particular concern 

while we are expediting connections to the Gulf Coast schools is 

what we called gold plating. In our investigation, we should, and 

apparently in Atlanta, Cisco Systems convinced local officials that 

individual elementary schools needed servers large enough and expensive enough to operate some whole school districts. In El Paso, 

IBM spent some $69 million of Federal and local funds on extravagant gear and services, with no noticeable effect on the education 

of the school children in that city. 

Mr. Chairman, the Atlanta and El Paso situations were merely 

some of the worse examples of this problem that this committee investigated, but it was a pervasive problem. The same sales persons 

with the same ethics are undoubtedly already plying the latest 

whiz-bang gadgetry to the school trade in the Gulf Coast. They retain the irresistible selling point that Uncle Sam, or in this case, 

maybe Uncle E-rate, will pay for most of it, 90 percent. We have 

seen repeated examples of the most outrageous FEMA contracts 

going to overpriced and under-qualified companies in the wake of 

the storms. There appears to be nothing in our E-rate record to 

suggest that the FCC or USAC is capable of preventing a repeat 

of fraud and waste in the rebuilding and reconnecting effort. I truly 

hope that we will hear otherwise today. 

With that, Mr. Chairman, I would yield back the balance of my 

time, and thank you. 

Mr. WHITFIELD. Thank you, Mr. Stupak. And at this time, I recognize the gentle lady from Tennessee, Ms. Blackburn, for her 

opening statement. 

Ms. BLACKBURN. Mr. Chairman, I will waive the statement and 

reserve my time for questions. 

Mr. WHITFIELD. Okay, thank you. I know you were sorry to hear 

there are no more opening statements for you to listen to, but—so 

at this time, I want to formally introduce our witnesses this morning, or this afternoon. 

First of all, Mr. Thomas Navin, who is the chief of the Wireline 

Competition Bureau at the Federal Communications Commission. 

We also have with us the Honorable H. Walker Feaster, who is the 

inspector general of the Federal Communications Commission. We 

have Ms. Lisa Zaina, who is the chief executive officer of the Universal Service Administrative Company, and she is accompanied by 

Mr. Mel Blackwell, who is the acting vice president of the Schools 

and Libraries Division at USAC. And then our final witness is Mr. 

Gary Rawson, who is the State E-rate coordinator from the Mississippi Department of Information Technology Services. 

As you all probably know, this is an Oversight and Investigation’s hearing, and it is our custom, when holding an investigative 

hearing, to ask that witnesses testify under oath. Do any of you 

have any objection to testifying under oath? 

The Chair would also advise you that under the rules of the 

House and the rules of the committee, you are entitled to be advised by counsel. Do any of you desire to be advised by counsel during your testimony today? 

In that case, if you would please rise and raise your right hand, 

I will swear you in. 

[Witnesses sworn.] 

5

Thank you. You are now under oath, and we will start with you, 

Mr. Navin. You may give a 5-minute summary of your written 

statement. Be sure and turn your microphone if it is not. 

TESTIMONY OF THOMAS J. NAVIN, CHIEF, WIRELINE COMPETITION BUREAU, FEDERAL COMMUNICATIONS COMMISSION; H. WALKER FEASTER III, INSPECTOR GENERAL, FEDERAL COMMUNICATIONS COMMISSION; LISA M. ZAINA, 

CHIEF EXECUTIVE OFFICER, UNIVERSAL SERVICE ADMINISTRATIVE COMPANY; AND GARY RAWSON, STATE E-RATE COORDINATOR, MISSISSIPPI DEPARTMENT OF INFORMATION 

TECHNOLOGY SERVICES 

Mr. NAVIN. Thank you, Mr. Chairman and distinguished members of the subcommittee. Again, my name is Tom Navin, and I 

have served as the chief of the Federal Communications Commission’s Wireline Competition Bureau since the beginning of May 

2005. I thank you for this opportunity to appear before you to discuss our plans to use the Universal Service Fund E-rate Program 

to assist in Hurricane Katrina recovery. 

Hurricane Katrina caused catastrophic damage and massive 

flooding in areas of Louisiana, Mississippi, and Alabama. The loss 

of life and damage to property is astounding, and our thoughts and 

prayers go out to those people affected by this disaster. AS I am 

sure that you are aware, most of the communications industry sustained substantial damage to their facilities in the affected areas, 

and the damage has had a significant impact on consumers in 

those areas. 

Hurricane Katrina knocked out more than 3 million customer 

phone lines in the Louisiana, Mississippi, and Alabama. The 

wireline telecommunications network sustained enormous damage 

both to the switching centers that route calls and to the lines used 

to connect buildings and customers to the network. 

The work to restore communications services began almost immediately. Despite the significant obstacles, like continued flooding, 

lack of commercial power, dwindling fuel resources, and security 

concerns, the companies in the region have made meaningful 

progress to restore service in the disaster area. Even with these efforts, given the enormity of the disaster, many of the communication services in the affected areas remain damaged. Today, we understand that more than 200,000 customer lines remain out of 

service. More than 500 DS-3’s worth of interoffice facilities remain 

down. Although many cell sites have been restored, hundreds are 

still not operational in the affected area. More than 50 radio and 

television stations remain off the air. 

On August 30, Chairman Martin established an internal task 

force consisting of senior executives in management from within 

the commission. The task force activity centered around three 

major goals: first, regulatory relief for industries; second, industry 

outreach and coordination with other Federal agencies; and third, 

assistance to consumers and evacuees. The task force has been 

working on these assignments continuously since August 30th, and 

the commission was open throughout the Labor Day weekend, as 

well as the past several weekends. To date, hundreds of commission employees have assisted in this effort. 

6

On September 15, 2005, Chairman Martin announced his intention to propose to the other members of the commission action intended to address the damage caused by Hurricane Katrina. To enhance the commission’s planning and response efforts for times of 

crisis, Chairman Martin announced his intention to propose a new 

Public Safety/Homeland Security Bureau to consolidate the public 

safety, Homeland Security, and disaster management functions 

currently housed in multiple bureaus and offices throughout the 

commission. Chairman Martin also announced his intention to establish an independent panel to review and improve the disaster 

preparedness of the agency. Chairman Martin also announced his 

intention to establish an independent panel to review the impact 

of Hurricane Katrina, and to make recommendations on ways to 

improve disaster preparedness, public safety operations, and network reliability. 

To provide immediate relief to the Hurricane Katrina disaster 

areas and to the disaster victims, Chairman Martin proposed to 

work through the existing USF programs to target approximately 

$211 million in universal service support to consumers, schools, libraries, health care providers, and telecommunication service providers affected by Hurricane Katrina. Chairman Martin proposed 

to work through the existing low-income, rural health care E-rate 

and high-cost universal service programs to make this temporary 

support available. 

Chairman Martin proposed to use the E-rate Program to help reconnect schools and libraries throughout the region. This would 

consist of three measures. First, we would open a new funding year 

for 2005, for the 2005 window, for schools and libraries damaged 

by the hurricane. This action would allow the approximately 600 

schools and libraries damaged by the hurricane, and in need of 

funds for this funding year, to revise their requests for support in 

light of the dramatically changed circumstances caused by the hurricane. Second, we would treat schools and libraries struck by the 

hurricane at the highest level of priority, 90 percent, for the funding years of 2005 and 2006. And finally, we would also allow 

schools and libraries serving evacuees to amend their 2005 applications to account for the unexpected increase in population. We estimate that these E-rate measures could provide approximately $132 

million to schools and libraries in the disaster areas that were 

damaged by Hurricane Katrina. 

We are committed to making sure that these USF monies are 

used well and that program is protected from potential waste, 

fraud and abuse. For that reason, applicants for this temporary 

support, including the E-rate supported noted earlier, would have 

to comply with all existing program requirements. This includes, 

for example, competitive bidding requirements, certification requirements, document retention requirements, strengthened technology plan requirements, and potential audit requirements. The 

existing program’s application processes and procedures, including 

the Universal Service Administrative Company’s program integrity 

assurance review procedures and selected review procedures, which 

subject applications for E-rate monies through heightened scrutiny, 

will continue to apply to applicants for the Hurricane Katrina-specific support. All other safeguards established in the program will 

7

continue to apply, including the E-rate Program’s existing $2.25 

billion annual funding cap. 

Finally, we are examining potential additional safeguards for the 

Hurricane Katrina initiatives. These include relying the Federal 

Emergency Management Agency determinations, that households 

are eligible for disaster assistance, or that a school or library is located in the disaster-struck county. We also are considering additional audit and certification requirements as part of this temporary package. 

The damage wrought by Hurricane Katrina is tremendous and 

its effects will be felt for months and possibly years to come. The 

commission stands ready to work with Congress, our colleagues at 

the Federal, State, and local agencies, and the American public to 

do whatever we can to help the disaster relief and restoration efforts. 

I would be pleased to respond to your questions. Thank you. 

[The prepared statement of Thomas J. Navin follows:]

PREPARED STATEMENT OF THOMAS J. NAVIN, CHIEF, WIRELINE COMPETITION

BUREAU, FEDERAL COMMUNICATIONS COMMISSION

Good morning Mr. Chairman and distinguished members of the Subcommittee. 

My name is Thomas Navin and I have served as the Chief of the Federal Communications Commission’s Wireline Competition Bureau since the beginning of May 

2005. Thank you for this opportunity to appear before you to discuss our plans to 

use the Universal Service Fund (USF) E-rate Program to assist in Hurricane 

Katrina recovery. 

BACKGROUND

Hurricane Katrina caused catastrophic damage and massive flooding in areas of 

Louisiana, Mississippi, and Alabama. The loss of life and damage to property is astounding, and our thoughts and prayers go out to those people affected by this disaster. As I am sure you are aware, most of the communications industry sustained 

tremendous damage to their facilities in the affected area, and the damage has had 

a significant impact. The damage to the communications infrastructure hampered 

the rescue operations of emergency responders. Relief efforts and survivors are still 

struggling with the effects of the hurricane. Survivors lack information about relief 

efforts. People displaced from their homes do not have the means to contact their 

loved ones to let them know they are safe. And of course, survivors remaining in 

the affected area lack a reliable means of contacting the authorities and getting help 

in lifethreatening situations. 

Hurricane Katrina knocked out more than 3 million customer phone lines in the 

Louisiana, Mississippi, and Alabama area. The wireline telecommunications network sustained enormous damage both to the switching centers that route calls and 

to the lines used to connect buildings and customers to the network. Local wireless 

networks also sustained considerable damage—more than a thousand cell sites were 

knocked out of service by the hurricane. During this disaster, millions of telephone 

calls were simply not able to get through. Of the 41 broadcast radio stations located 

in New Orleans and the surrounding area, only two AM and two FM stations remained on the air in the wake of the hurricane. 

The work to restore communications services began almost immediately. Despite 

the significant obstacles like continued flooding, lack of commercial power, dwindling fuel resources, and security concerns, the companies in the region have made 

meaningful progress to restore service in the disaster area. Even with these efforts, 

given the enormity of the disaster, many of the communications services in the affected areas remain damaged. Today, we understand that more than 200,000 customer lines remain out of service. More than 500 DS-3 interoffice facilities remain 

down. Although many cell sites have been restored, hundreds are still not operational in the affected area. More than 50 radio and television stations remain off 

the air. 

8

COMMISSION ACTIONS

On August 30th, Chairman Martin established an internal Task Force consisting 

of senior executives and management from within the Commission. The Task 

Force’s activities centered around three major goals: (1) Regulatory Relief for Industries; (2) Industry Outreach and Coordination with Other Federal Agencies; and (3) 

Assistance to Consumers and Evacuees. The Task Force has been working on these 

assignments continuously since August 30th, and the Commission was open 

throughout the Labor Day weekend to continue the work. To date, hundreds of Commission employees have assisted in this effort. 

On September 15, 2005, Chairman Martin announced his intention to propose to 

the other members of the Commission action intended to address the damage caused 

by Hurricane Katrina. To enhance the Commission’s planning and response efforts 

for times of crisis, Chairman Martin announced his intention to propose a new Public Safety/Homeland Security Bureau to consolidate the public safety, homeland security, and disaster management functions currently housed in multiple bureaus 

and offices throughout the Commission. Chairman Martin also announced his intention to establish an independent panel to review the impact of Hurricane Katrina 

and to make recommendations on ways to improve disaster preparedness, public 

safety operations, and network reliability. To provide immediate relief to the Hurricane Katrina disaster area and victims, Chairman Martin proposed to work through 

the existing USF programs to target approximately $211 million in USF support to 

consumers, schools, libraries, healthcare providers, and service providers affected by 

Hurricane Katrina. 

Chairman Martin proposed to work through the existing Low Income, Rural 

Healthcare, E-rate, and High Cost USF programs to make this temporary support 

available. We estimate that approximately $79 million would be made available 

through the Low Income and Rural Healthcare programs to help the disaster area. 

Waivers, clarifications, and temporary modifications of the Commission’s Low Income rules could be made to authorize support for a package consisting of at least 

300 minutes of wireless service and a handset. Similar waivers of existing Low Income program rules could provide support to help people who have been cut off from 

telephone service to reestablish service. Our proposal would provide public and nonprofit healthcare providers a new opportunity to apply for increased discounts for 

advanced telecommunications and information services used in telemedicine applications to treat victims of Hurricane Katrina. 

Chairman Martin also proposed to allow high cost carriers participating in the 

High Cost Program to prioritize rebuilding facilities damaged by the hurricane. This 

initiative would allow telephone companies greater flexibility to use USF support for 

rebuilding wire centers affected by the hurricane. 

Finally, Chairman Martin proposed to use the E-rate Program to help reconnect 

schools and libraries throughout the region. This would consist of three measures. 

First, we would open a new Funding Year 2005 filing window for schools and libraries damaged by the hurricane. This action would allow the approximately 600 

schools and libraries damaged by the hurricane and in need of funds for this Funding Year to revise their requests for support in light of the dramatically-changed circumstances caused by Hurricane Katrina. Second, we would treat schools and libraries struck by the hurricane at the highest level of priority (90%) for Funding 

Years 2005 and 2006. Finally, we would also allow schools and libraries serving 

evacuees to amend their Funding Year 2005 applications to account for the unexpected increase in population. We estimate that these E-rate measures could provide 

approximately $132 million to schools and libraries in the disaster areas that were 

damaged by Hurricane Katrina. 

We are committed to making sure that these USF monies are used well and that 

the program is protected from potential waste, fraud, and abuse. For that reason, 

applicants for this temporary support, including the E-rate support noted above, 

would have to comply with all existing program requirements. This includes, for example, competitive bidding requirements, certification requirements, document retention requirements, strengthened technology plan requirements, and potential 

audit requirements. The existing program’s application processes and procedures—

including the Universal Service Administrative Company’s (USAC’s) Program Integrity Assurance review procedures and selective review procedures, which subject applications for E-rate monies through heightened scrutiny—will continue to apply to 

applicants for the Hurricane Katrina-specific support. All other safeguards established in the program will continue to apply, including the E-rate program’s existing 

$2.25 billion annual funding cap. Finally, we are examining potential additional 

safeguards for the Hurricane Katrina initiatives. These include relying on Federal 

Emergency Management Agency (FEMA) determinations that households are eligiVerDate 0ct 09 2002 11:33 May 05, 2006 Jkt 000000 PO 00000 Frm 00012 Fmt 6633 Sfmt 6621 F:\DOCS\24253.TXT HCOM1 PsN: JOEP
9

ble for disaster assistance or that a school or library is located in a disasterstruck 

county. We also are considering additional audit and certification requirements. 

CONCLUSION

The damage wrought by Hurricane Katrina is tremendous and its effects will be 

felt for months and possibly years to come. The Commission stands ready to work 

with Congress, our colleagues at federal, state, and local agencies, and the American 

public to do whatever we can to help with the disaster relief and restoration efforts. 

I would be pleased to respond to your questions.

Mr. WHITFIELD. Thank you very much. Mr. Feaster, you are recognized for 5 minutes. 

TESTIMONY OF H. WALKER FEASTER III 

Mr. FEASTER. Mr. Chairman and members of the subcommittee, 

I appreciate the opportunity to come before you today to discuss 

the FCC’s plans for participation in Hurricane Katrina’s rebuilding 

activities, and our plans to provide oversight for these activities. I 

applaud the commission’s efforts to be a positive force in the postKatrina recovery, and I am supportive of all the agency can do to 

assist. However, I am mindful that, in my role as inspector general, 

I am responsible for ensuring that these relief efforts do not 

present unacceptable risks to the agency and the taxpayers’ dollars. 

I would like to discuss my plans for oversight of the Katrina-related efforts. 

The FCC’s financial contribution to the recovery is via the USF. 

My concerns about the USF, and in particular, the E-rate Program, 

have been the subject of numerous discussions with agency management, several audit reports and semiannual reports issued by 

my office, and previous testimony before this committee. I will discuss concerns we have had about this program, that they may generate higher audit risk associated with the hurricane recovery efforts. Due to the materiality and assessment of audit risk, we have 

focused much of our attention on USF mechanisms for funding telecommunications and information systems for schools and libraries, 

known as the Schools and Libraries Program, or E-rate. 

The audits and investigations performed to date indicate a highlevel risk for misuse of funds in the E-rate Program. We have had 

specific concerns about these E-rate—about the E-rate Program 

that will have a direct impact to disaster assistance funding. These 

include but are not—excuse me. These include but are not limited 

to a lack of clarity in the program’s rules being a catalyst for both 

inadvertent errors and deliberate waste and fraud and abuse and 

weaknesses in the competitive procurement requirements that use 

E-rate goods and—used to purchase E-rate goods and services. 

I am concerned that the programmatic weaknesses that we have 

found will be compounded by the confusion of overworked school 

and library administrators trying to rebuild shattered information 

systems under less than ideal circumstances. Additionally, I fear 

these rules, waivers, or exemptions will be taken advantage of by 

unscrupulous E-rate service provides that Federal criminal investigations have turned up time and time again. 

Our most significant effort to date to implement our E-rate oversight program has been our ongoing work to establish a three-way 

contract under which the OIG and USAC can obtain audit resources to conduct USF audits. The project has been delayed, but 

10

the chairman has recently expressed support for this three-way 

agreement, and we are hopeful that the contract will move forward 

in the very near future. In the interim, we are working with USAC 

Internal Audit Department and a public accounting firm under contract to USAC to conduct audits of E-rate beneficiaries. 

Because we have focused our limited resources on E-rate, we 

have not been able to devote a great deal of attention other USF 

mechanisms. The other large USF program is the High Cost Program. At present, we are assessing risk in the High Cost Program 

in anticipation of being able to institute an audit program in the 

near future. 

The proposed low-income disaster relief is very interesting, in 

that it seems to represent an entirely new use for the fund. To the 

best of my knowledge, the support mechanism has not been used 

in the past to provide wireless handsets and free minutes of service 

in the past. We will include an audit in our fiscal year 2006 audit 

plan to determine how eligibility for this help is determined and 

verified, and measures the commission has taken to ensure that 

the products delivered are in the hands of the people who need the 

help. 

The Office of Inspector General has been and remains committed 

to meeting our responsibility for providing effective independent 

oversight in the USF. My office will dedicate as much of our resources as possible to ensure that the extra measure of support 

provided by the commission is utilized in a manner that best benefits the people whose lives have been so horribly uprooted by Hurricane Katrina. 

Thank you. I will be happy to answer any questions. 

[The prepared statement of H. Walker Feaster III follows:]

PREPARED STATEMENT OF H. WALKER FEASTER III, INSPECTOR GENERAL, FEDERAL

COMMUNICATIONS COMMISSION

Mr. Chairman and Members of the Subcommittee, I appreciate the opportunity 

to come before you today to discuss the FCC’s plans for participation in Hurricane 

Katrina rebuilding activities and our plans to provide oversight of these activities. 

Last week I participated in a panel before this subcommittee, in which we discussed 

plans of several Inspectors General for providing oversight of their agencies Katrina 

related efforts. Today I will expand on some of the topics touched upon in my testimony from that date, and provide additional information on my Office’s plans for 

oversight of the FCC’s assistance in rebuilding in the wake of Hurricanes Katrina 

and Rita. Since the majority of the actual funds used by the FCC in the recovery 

efforts will come from the Universal Service Fund (USF), I will place emphasis on 

the plans to use the USF, and particularly the E-rate fund, in the rebuilding efforts. 

FCC USE OF THE USF IN KATRINA REBUILDING SUPPORT

The Commission took the unprecedented step of holding an Open Meeting in Atlanta, Georgia on September 15, 2005. At this meeting, the Commission announced 

that it would use $211 million of funds from the USF to assist recovery efforts in 

the disaster area. The FCC will use the four existing support mechanisms of the 

USF to provide this assistance, as follows:

• The Low Income program will be used to provide evacuees and persons in the affected areas still without telephone service wireless handsets and a package of 

300 minutes. This fund will also be used to provide support for reconnecting 

consumers as the area is rebuilt. The FCC has estimated this will amount to 

$51 million of Low Income support. 

• The Rural Health Care program will allow public and for-profit health care providers to apply for assistance with the cost of telecommunications services 

under relaxed participation requirements. The FCC has estimated this will 

amount to $28 million of Rural Health Care support. 

11

• The Schools and Libraries program (or E-rate) will be used to reconnect schools 

and libraries in the affected areas to telecommunication and network services. 

Using a variety of program rule waivers, the FCC will be able to authorize an 

estimated amount estimated of $132 million in E-rate funds for the 600 schools 

and libraries hit by the hurricane. • The High Cost program will allow greater flexibility for telephone carriers to use 

high cost funds to prioritize facilities affected by Katrina. 

On September 21, 2005 the Commission issued an Order that provides some details on how this support will be facilitated. In this Order, numerous filings for various forms and information under the USF support mechanisms were postponed for 

a period of up to 150 days, including:

• For the E-rate program, responses to information requests from the Universal 

Service Administrative Company (USAC) relating to funding applications, formal requests for extensions of service delivery deadlines and service substitutions, and filings related to actions seeking recovery of funds disbursed in violation of program rules. • For the Low Income Program, numerous filings that provide information related 

to the calculation and receipt of funding. • Filings that support carrier contributions to the USF. 

These temporary waivers are in effect from August 29, 2005 to January 26, 2006. 

In addition, the Commission has waived recordkeeping requirements pertaining to 

those entities in the Katrina affected areas. 

The Commission has also stated that they will distribute additional funds in the 

hurricane affected areas by setting all schools and libraries in the disaster area at 

the 90% level of support, which is the highest level of support available under the 

program, in FY 2006. They will open a new 2005 funding window for schools and 

libraries in the affected areas to request new or additional support, and they will 

allow schools and libraries serving evacuees to amend their 2005 funding to account 

for increased student populations. 

The Commission is currently drafting additional regulatory relief that will be 

needed to implement aspects of the Commission’s plans. My Office has been requested to review and provide comment on the proposed actions. 

OTHER REBUILDING SUPPORT BY THE FCC

The Commission has also announced the creation of a new Bureau—the Public 

Safety/Homeland Security Bureau. This Bureau will be comprised of existing functions currently in other FCC bureaus and offices and will have responsibility for the 

FCC’s public safety, national security, disaster management programs. 

Additionally, the Commission has undertaken several actions that allow the telecommunications industry regulatory flexibility in rebuilding efforts. Through the 

issuance of temporary rule waivers and special temporary authorities, the FCC is 

assisting in re-establishing emergency communications, providing assistance and relief to television and radio stations in getting back on the air, extending regulatory 

fee payments, extending filing due dates for licensees, and performing a host of activities to contribute to the recovery efforts. The FCC is coordinating with the Federal Emergency Management Agency and the National Communications System, as 

well as state and local governments and organizations to communicate the FCC’s 

flexibility in eligibility standards and processes to aid in the Hurricane Katrina relief efforts. 

AUDIT OVERSIGHT OF THE FCC’S KATRINA-RELATED EFFORTS

I applaud the Commission’s efforts to be a positive force in the post-Katrina recovery, and I am supportive of all that this agency can do to assist. However, I am 

mindful that in my role as Inspector General, I am responsible for ensuring that 

these relief efforts do not present unacceptable risks to the agency and the taxpayer’s dollar. I would like to discuss my plans for oversight of the FCC’s Katrinarelated efforts. 

The myriad of rule waivers and special temporary authorities the Commission is 

granting for such areas as the resumption of radio and television broadcasting and 

regulatory licensing has only a small impact on audits conducted by my office. I 

have received estimates from agency management that indicate that efforts related 

to disaster recovery will cost approximately $400 thousand in appropriated funding 

for personnel costs and contracted efforts. The Commission does not anticipate requesting additional budgetary resources for disaster recovery efforts. 

Our primary audit role in these functions is to ensure that adequate internal controls are in place and operating effectively to ensure regulatory compliance and that 

financial cost accumulation and reporting is current, accurate and complete. While 

12

the reorganization and formulation of a new bureau carries a higher level of risk, 

our concerns are the same—are the financial and operational controls in place to 

ensure that the agency’s programs and functions are operating in an effective and 

efficient manner and in compliance with applicable laws and regulations. My financial statement audits for FY 2005 and 2006 are the best tools I have available to 

make this assessment. My staff is coordinating with our contracted independent 

public auditors to ensure that testing under our financial statement audit will address any concerns. 

One area of relief that impacts an area of audit concern for my Office is the extension of filing deadlines for payment of annual regulatory fees. The Commission has 

provided regulatees in the affected areas an extended deadline for the payment of 

regulatory fees. My Office currently has in progress an audit of regulatory fee collections and we will incorporate additional tests into this audit to ensure compliance 

with the deadline extension granted by the Commission. Additionally, we are considering adding a review of the Emergency Alert System to our FY 2006 Audit Plan 

to determine of it operated as effectively as possible during the hurricane event. 

OIG OVERSIGHT OF THE USF KATRINA FUNDING

The FCC’s financial contribution to the recovery is via the USF. My concerns 

about the USF, and in particular the E-rate program, have been the subject of numerous discussions with agency management, and several audit reports and semiannual reports issued by my Office. We have testified before this Subcommittee on 

three occasions, as well as other House and Senate committees, about concerns regarding the E-rate program. I will summarize the four parts of the USF and our 

efforts to provide oversight of the fund. In this discussion, I will focus on how concerns we have had about this program may generate higher audit risks associated 

with the hurricane recovery efforts. 

Due to materiality and our assessment of audit risk, we have focused much of our 

attention on the USF mechanism for funding telecommunications and information 

services for schools and libraries, also known as the ‘‘Schools and Libraries Program’’ or the ‘‘E-rate’’ program. The E-rate program has expended $10 billion since 

its inception in 1998. Our involvement in E-rate audits and investigations has highlighted numerous concerns with this program. 

Our E-rate oversight program is designed around two corollary and complementary efforts. First, we would conduct audits on a statistical sample of beneficiaries 

large enough to allow us to derive inferences regarding beneficiary compliance at 

the program level. Second, we would establish a process for vigorously investigating 

allegations of fraud, waste, and abuse in the program. 

The primary obstacle to our implementation of effective and independent oversight of the E-rate program has been a lack of adequate resources to conduct audits 

and provide audit support to investigations. Despite limited resources, the OIG has 

implemented an aggressive independent oversight program. My oversight program 

includes: (1) audits conducted using internal resources; (2) audits conducted by other 

federal Offices of Inspector General under reimbursable agreements; (3) review of 

audit work conducted by USAC; and (4) active participation in federal investigations 

of E-rate fraud.1To date One-hundred and fifty-eight (158) audits have been completed by the OIG, USAC internal auditors, or USAC contract auditors in which the 

auditors have reached a conclusion about beneficiary compliance. Of the 158 audits, 

auditors determined that beneficiary were not compliance in 34% of the reports 

issued. Recommended fund recoveries for those audits where problems were identified total nearly $18 million. Additionally, we are providing audit support to 26 investigations into E-rate fraud allegations and monitoring another 13 investigations. 

There have been successful criminal prosecutions for E-rate fraud and settlement 

recoveries in excess of $30 million. 

The audits and investigation performed to date indicate a high level of risk for 

misused funds in the E-rate program. We have specific concerns about the E-rate 

program that will have a direct impact the disaster assistance funding, and I would 

like to highlight some of these issues. 

For example, we have cited a lack of clarity in the program’s rules as being a catalyst for both inadvertent errors and deliberate fraud, waste and abuse. We believe 

that it is critical that participants in the E-rate program have a clear understanding 

of the rules governing the program and the consequences that exist if they fail to 

comply with those rules. In circumstances under which additional rule waivers are 

laid on top of existing ambiguities, the potential for either accidental or intentional 

noncompliance with the rules and abuse of the Fund is dramatically increased. 

We believe that it is possible under the current structure that applicants may not 

have a clear understanding of program rules. We are concerned that the CommisVerDate 0ct 09 2002 11:33 May 05, 2006 Jkt 000000 PO 00000 Frm 00016 Fmt 6633 Sfmt 6621 F:\DOCS\24253.TXT HCOM1 PsN: JOEP
13

sion has not determined the consequences of beneficiary non-compliance in many 

cases and that, in those instances where the Commission has addressed the issue 

of consequences for non-compliance, the consequences associated with clear violations of program rules do not appear to be consistent. In some cases, USAC has implemented numerous policies and procedures to administer the E-rate program that 

the Commission has not adopted these USAC operating procedures and therefore, 

there is no legal basis for recovery of funds when applicants fail to comply with 

these procedures. To further complicate matters, we have been advised that, in some 

cases, USAC may have exceeded their authority in establishing program requirements. 

We have also described weaknesses in the competitive procurement requirements 

used to purchase E-rate goods and services and the ineffective use of purchased 

goods and services. Program rules require that applicants use a competitive procurement process to select vendors, to preclude instances where prices charged to 

schools and libraries are needlessly high and the Fund is unable to provide support 

to eligible schools and libraries. 

Although the programs competitive bidding requirements were intended to ensure 

that schools and libraries are informed about all of the choices available to them, 

we have observed numerous instances in which beneficiaries are not following the 

program’s competitive bidding requirements or are not able to demonstrate that 

competitive bidding requirements are being followed. We question whether the rules 

are adequate to ensure a competitive process is followed. In addition, weak recordkeeping requirements to support the procurement process, as well as other aspects 

of the E-rate application, offer little protection to the program. 

Since our involvement in this program, I have become increasingly concerned 

about efforts to resolve audit findings and to recover funds resulting from E-rate 

beneficiary audits. It has been our observation that audit findings are not being resolved in a timely manner and that, as a result, actions to recover inappropriately 

disbursed funds are not being taken in a timely manner. While it appears this situation may be slightly improved in the past year or so, I remain concerned about the 

Commission’s support to resolving audit findings. In September 2004, I issued three 

draft reports on E-rate compliance at private schools in the Virgin Islands. The 

Commission did not provide timely responses to these drafts, and in fact, never formally responded to these draft reports. On August 18, 2005, I issued these reports 

in final without agency comments. Given the planned increase in the number of Erate audit reports over the next several weeks and months, I have strong concerns 

at the Commission’s ability to provide comment on draft reports and resolve audit 

findings. 

Site visits are conducted during most E-rate beneficiary audits. Site visits are conducted for several reasons including to evaluate the eligibility of facilities where 

equipment is installed, to verify that equipment is installed and operational, and 

to verify that equipment is being used for its intended purpose. Examples of concerns identified during audits and investigations are as follows:

• Goods and services not being provided. • Unauthorized substitution of goods and services. • Goods and services being provided to ineligible facilities (e.g., non-instructional 

building including dormitories, cafeterias, and administrative facilities). • Equipment not being installed or not operational. Program rules require that nonrecurring services be installed by a specified date. However, there is no specific 

FCC rule requiring beneficiaries to use equipment in a particular way, or for 

a specified period of time, or to full efficiency. Commission staff have provided 

guidance stating that if the equipment was uninstalled (i.e., still in a box) that 

would represent a rule violation. However, Commission staff has also provided 

guidance stating that the rules do not require that beneficiaries effectively utilize the services provided or that the beneficiaries maintain continuous network 

or Internet connectivity once internal connections are installed. 

In addition to the concerns listed above, we have on-going concerns regarding the 

program’s over reliance on self-certification by participants, weaknesses in technology planning, discount calculations and beneficiary payment of their share of the 

costs. I am concerned that the kinds of programmatic weaknesses I have described 

will be compounded by the confusion of overworked school and library administrators trying to rebuild shattered information systems under less than ideal circumstances in the hurricane affected areas. 

Additionally, I fear these rule waivers or exemptions will be taken advantage of 

by unscrupulous E-rate service providers that federal criminal investigations have 

turned up time and again. Since the inception of the E-rate program in 1998, over 

$184 million has been expended in Louisiana, and over $79 million in New Orleans 

alone. As well as E-rate funds, the High Cost program has expended $555 million 

14

in the state of Louisiana since 1998. Rebuilding the shattered infrastructure is critical. The financial needs will be huge and the risk of misspent funds must be taken 

into account. This level of funding will certainly attract the less honest service providers to the area who might hope to take advantage of the additional funds being 

expended under relaxed rules. 

I have mentioned the lack of resources my Office has struggled with in our work 

to provide effective and independent oversight of the E-rate program, as well as the 

other USF support programs. We have requested appropriated funds in our last 

three budget requests to Congress and have been supportive of efforts to provide the 

Commission with access to the USF for oversight funding. In addition, we are working with USAC Internal Audit department (IAD) and a public accounting firm under 

contract to USAC to conduct audits of One-hundred (100) E-rate beneficiaries. This 

project was initiated in August 2004 and is expected to be completed in FY 2006. 

The round of 100 audits is being conducted under a relationship with USAC and 

the public auditors that could be described as semi-formal, at best. OIG is not a 

party to the contract between USAC and the contracted auditors and our participation is documented only in the engagement letter. We believe that our participation 

in this process would be enhanced by a more formal partnership between the Commission, USAC and the contracted auditors. 

Our most significant effort to date to implement our E-rate oversight program has 

been our on-going work to establish a three-way contract under which the OIG and 

USAC can obtain audit resources to conduct USF audits. Under this contract, we 

intend to conduct the body of audits necessary to assess fraud, waste, and abuse 

at the program level by conducting a statistically valid sample of audits for each 

of the four USF funding mechanisms. An additional objective is to identify improper 

payments as defined by the Office of Management and Budget to estimate error 

rates for the Improper Payments Improvement Act of 2002 (IPIA). Unfortunately, 

this project has been delayed. A Request for Proposal for this contract was issued 

in November 2004. The proposal evaluation process was completed, a contractor was 

selected and USAC submitted the proposed contract for Commission approval in 

April 2005. The proposed contract was held up in the transition between the former 

FCC Chairman and Chairman Martin, as the Chairman wanted to give this procurement detailed review prior to approval. Recently, we were provided a memorandum that lists concerns that the FCC Office of General Counsel has regarding 

the contractor selection process. Given the issues raised by the General Counsel, I 

have agreed, along with the Managing Director of the FCC, the Chief of the 

Wireline Competition Bureau and the General Counsel, that recompeting this contract is necessary to protect the interests of the fund and the integrity of the procurement process. The Chairman has recently expressed support for this three-way 

agreement and we believe that the contract will move forward in the very near future. 

USAC is contemplating further audits to meet their oversight responsibilities, and 

we may be invited to participate in the same manner as we are in the current round 

of 100 audits. While this arrangement is less than ideal, it does allow for E-rate 

compliance audits to continue. Our auditors will incorporate appropriate steps in the 

audit work programs currently in use to ensure the Katrina rule waivers are considered in audit planning and fieldwork. We will continue to work in close coordination 

with USAC internal auditors, independent auditors under contract to USAC, and 

other federal auditors conducting E-rate audits under interagency memoranda of 

understanding. We will ensure that the special risks that the FCC’s proposed rules 

bring are addressed in the conduct of future audits. 

However, the current working relationship we have with USAC IAD and the 

three-way contract are both solutions that could be described as second best. As we 

have stated previously, limited resources have precluded our ability to implement 

our planned oversight of the USF. Our preferred method of providing oversight of 

the USF program is for OIG to have direct access to the Fund for our use in implementing an independent oversight program. Any oversight program of the magnitude encompassed by the three-way agreement presents management challenges 

for our office. The audit supervision and quality assurance necessary for an audit 

program of this size is a major effort, and I do not have adequate staff to perform 

this work. I have requested funds in my 2006 and 2007 budget requests for additional staff and contract resources to assist in the management of this audit program; however, I would reiterate my support for enabling OIG to use the USF as 

the source of funds for this work. 

Because we have focused our limited resources on the E-rate program, we have 

not been able to devote a great deal of attention to the other USF mechanisms. The 

other large USF program is the High Cost program. This program provides support 

to telecommunication carriers to ensure that consumers in all regions of the United 

15

States have access to and pay rates for telecommunications services that are reasonably comparable to those services provided and rates paid in urban areas. This program has averaged over $2.5 billion in annual expenditures and my office is aware 

that we need to expand our oversight in this area. However, we have not had the 

resources to establish an effective oversight program. In the breakdown of the $211 

million of Katrina relief there does not appear to be additional funds contemplated 

for High Cost and I believe that the primary effect of the Katrina support will be 

the redistribution of existing support. At the present, we are assessing risks in the 

High Cost program in anticipation of being able to institute an audit program in 

the future and will ensure our plans address any considerations brought by the 

Katrina relief. 

The proposed Low Income disaster relief is very interesting, in that it seems to 

represent an entirely new use of this Fund. The Low Income program assists eligible low-income consumers to establish and maintain telephone service by discounting services provided by local telephone companies. The USF reimburses the 

telephone companies for the discounts under the Low Income program. This program provided $759 million in support in 2004 and is considered to be of lower audit 

risk than the E-rate or High Cost programs. To the best of my knowledge, this support mechanism has not been used to provide wireless handsets and free minutes 

of service in the past. We will include an audit in our FY 2006 Audit Plan to determine how eligibility for this help is determined and verified and measures the Commission has taken to ensure the products provided are in the hands of the people 

who need the help. 

The Rural Health Care program is the smallest USF program, having disbursed $38 million since 1999. The FCC’s proposed $28 million of disaster assistance to 

emergency health care providers in the affected region will represent a dramatic increase in Rural Health Care expenditures. This is being accomplished by increasing 

the discount rate, which is the portion of costs covered by the support mechanism 

to 50% for qualified providers in the affected areas and for health care providers 

providing assistance to disaster victims nationwide. Additionally, the FCC will allow 

health care providers to file new or amended applications for funds in the current 

year. We are still assessing the requirement for oversight represented by the additional disaster relief funds. 

CONCLUSION

The Office of Inspector General has been and remains committed to meeting our 

responsibility for providing effective independent oversight of the USF. My office 

will dedicate as much of our resources as possible to ensure that the extra measure 

of support provided by the Commission is utilized in a manner that best benefits 

the people whose lives have been so horribly uprooted by Hurricane Katrina. 

Thank you. I will be happy to answer any of your questions.

Mr. WHITFIELD. Thank you, Mr. Feaster. Ms. Zaina, you are recognized for 5 minutes. 

TESTIMONY OF LISA M. ZAINA 

Ms. ZAINA. Thank you, Mr. Chairman. Good afternoon, Mr. 

Chairman and members of the subcommittee. My name is Lisa 

Zaina, and I am the chief executive officer of USAC, which administers the Federal Universal Service Fund. Thank you, Mr. Chairman, for convening this hearing today. 

I appreciate the opportunity to come before you today to discuss 

USAC’s role in administering the fund and how USAC can assist 

the FCC with its Hurricane Katrina rebuilding activities. As we all 

know, the Gulf Coast was devastated by Hurricane Katrina and 

then Hurricane Rita. Our hearts go out to all of the survivors who 

are now struggling to put their lives back together. I would like to 

say at the outset of the hearing that USAC stands poised to assist 

the FCC in implementing its hurricane-related efforts. 

USAC looks forward to working closely with the commission to 

implement Chairman Martin’s September 15 proposals to use $211 

million from the fund for immediate relief to the program participants affected by Katrina. In anticipation of implementing ChairVerDate 0ct 09 2002 11:33 May 05, 2006 Jkt 000000 PO 00000 Frm 00019 Fmt 6633 Sfmt 6602 F:\DOCS\24253.TXT HCOM1 PsN: JOEP
16

man Martin’s proposals as quickly, efficiently and effectively as 

possible, USAC review its operations to better prepare it to carry 

out the necessary functions. USAC staff identified critical issues to 

the commission. 

Today, I will discuss USAC’s role in administering the fund. 

With me today is Mel Blackwell, Acting Vice President of the 

Schools and Libraries Program at USAC. We are happy to answer 

any questions you may have. 

USAC is the private not-for-profit corporation that administers 

the USF’s support programs, pursuant to the commission’s Part 54 

Rules. The four support programs are High Cost, Low-Income, 

Rural Health Care, and Schools and Libraries. USAC is governed 

by a board of directors that includes a broad representation of USF 

stakeholders. USAC anticipates support to be approximately $7 billion this year in universal service funds, with the High Cost Program receiving $4 billion, the Schools and Libraries Program, $2.25 

billion, the Low-Income Program, $800 million, and the Rural 

Health Care Program, $44 million. 

USAC and its dedicated professional staff are intimately familiar 

with the operations of the many aspects of the USF. USAC was 

very pleased to be able to assist the commission by providing the 

information it requested regarding USF support in the affected 

areas. USAC looks forward to working closely with the FCC to implement as quickly, efficiently and effectively as possible the emergency provisions the commission adopts. We recognize the proposals as an effort to ensure that people can begin putting their 

lives back together after the devastation of this disaster, and that 

we must work quickly to ensure that help gets to where help is 

needed. 

We applaud Chairman Martin and the commission for the quick 

response to the horrible devastation caused by Katrina. In addition 

to working with the commission to implement Chairman Martin’s 

relief proposals, we support the commission’s efforts to quickly address any emergency situation that implicate the USF in the future. With stakeholders, including schools and libraries, rural 

health care providers, telecommunications providers, we believe 

USAC can and will play an important role in providing information 

and assistance. 

As the administrator, one of the greatest concerns for USAC is 

protecting the integrity of the fund. To echo Mr. Feaster’s concerns 

in his testimony, USAC wants to make certain that it has the operational controls in place to ensure that USF programs and functions are operating in an effective and efficient manner, and in 

compliance with laws and regulations. We are prepared to work 

with the commission and the inspector general to identify additional ways to protect the integrity of the fund, in addition to the 

many measures USAC already employs. USAC will have a dedicated team to resolve any administrative issues regarding the 

chairman’s proposal. 

At the same time, USAC wants to ensure that the process for 

program participants is streamlined and easy to use. This is a 

point that Chairman Martin made in his statement at the open 

meeting September 15. USAC stands ready and is prepared to offer 

additional information to assist the commission on the operational 

17

aspects as well on the implementation of Chairman Martin’s proposals, and to work for a future streamlined and more systematic 

way to address disaster situations, whatever their cause and wherever they may occur. 

Once again, thank you for having me here today to testify on 

these important issues. 

[The prepared statement of Lisa M. Zaina follows:]

PREPARED STATEMENT OF LISA M. ZAINA, CHIEF EXECUTIVE OFFICER, UNIVERSAL

SERVICE ADMINISTRATIVE COMPANY

INTRODUCTION

Good afternoon Mr. Chairman and members of the subcommittee. My name is 

Lisa M. Zaina and I am the chief executive officer of the Universal Service Administrative Company, or USAC, which administers the federal Universal Service Fund 

(USF or Fund). Thank you, Mr. Chairman, for convening this important hearing 

today. 

I appreciate the opportunity to come before you today to discuss USAC’s role in 

administering the Fund and how USAC can assist the Federal Communications 

Commission (FCC or Commission) with its Hurricane Katrina rebuilding activities. 

As we all know, the Gulf Coast was devastated by Hurricane Katrina and then Hurricane Rita. Our hearts go out to all of the survivors who are now struggling to put 

their lives back together. I would like to say at the outset of this hearing that USAC 

stands poised to assist the FCC in implementing its Hurricane-related efforts. 

USAC looks forward to working closely with the Commission to implement Chairman Martin’s September 15th proposals to use $211 million from the Fund for immediate relief to the program participants affected by Hurricane Katrina. In anticipation of implementing Chairman Martin’s proposals as quickly, effectively, and efficiently as possible, USAC reviewed its operations to better prepare it to carry out 

the necessary functions. USAC staff identified initial critical issues to the Commission. 

Today, I will discuss USAC’s role in administering the Fund. With me today is 

Mel Blackwell, Acting Vice President of the Schools and Libraries program at 

USAC. We are happy to answer any questions you may have. 

USAC is the private, not-for-profit corporation that administers the USF support 

programs pursuant to the Commission’s Part 54 rules. The four support programs 

are High Cost, Low Income, Rural Health Care, and Schools and Libraries. USAC 

is governed by a Board of Directors that includes a broad representation of USF 

stakeholders. USAC anticipates support to be approximately $7 billion this year in 

universal service funds with the High Cost Program receiving $4 billion, the Schools 

and Libraries Program $2.25 billion, the Low Income Program $800 million, and the 

Rural Health Care Program $44 million. 

USAC and its dedicated professional staff are intimately familiar with the operations of the many aspects of the USF. USAC was very pleased to be able to assist 

the Commission by providing the information it requested regarding USF support 

in the affected states. 

USAC looks forward to working closely with the FCC to implement as quickly, 

efficiently, and effectively as possible the emergency provisions the Commission 

adopts. We recognize the proposals as an effort to ensure that people can begin putting their lives back together after the devastation of this disaster and that we must 

work quickly to ensure that helps gets to where help is needed. 

We applaud Chairman Martin and the Commission for the quick response to the 

horrible devastation caused by Hurricane Katrina. In addition to working with the 

Commission to implement Chairman Martin’s relief proposals, we support the Commission’s efforts to quickly address any emergency situation that may implicate the 

USF in the future. With stakeholders including schools and libraries, rural health 

care providers, and telecommunications providers, we believe USAC can and will 

play an important role in providing information and assistance. 

As the Administrator, one of the greatest concerns for USAC is protecting the integrity of the Fund. To echo Mr. Feaster’s concerns at a hearing before this subcommittee September 28, USAC wants to make certain that it has the operational 

controls in place to ensure that USF programs and functions are operating in an 

effective and efficient manner and in compliance with laws and regulations. We are 

prepared to work with the Commission and the Inspector General to identify additional ways to protect the integrity of the Fund in addition to the many measures 

18

USAC already employs. USAC will have a dedicated team to resolve any administrative issues regarding the proposal. 

At the same time, USAC wants to ensure that the process for program participants is streamlined and easy to use. This is a point that Chairman Martin made 

in his statement at the open meeting September 15th. 

USAC stands ready and is prepared to offer additional information to assist the 

Commission on the operational aspects, as well as on the implementation, of Chairman Martin’s proposals—and to work for a future streamlined and more systematic 

way to address disaster situations, whatever their cause, and wherever they may 

occur. 

Once again, thank you for having me here today to testify on these important 

issues.

Mr. WHITFIELD. Thank you, Ms. Zaina. At this time, I will recognize Mr. Rawson for his opening statement. 

TESTIMONY OF GARY RAWSON 

Mr. RAWSON. Thank you. I am Gary Rawson——

Mr. WHITFIELD. Do you have your microphone on? 

Mr. RAWSON. Is that better? I am Gary Rawson, State E-rate Coordinator for Information Technology Services in the State of Mississippi. I have been the E-rate coordinator for 8 years since the 

beginning of the program. I am also chair of SECA, which is State 

E-rate Coordinators Alliance, and I support this program with all 

the enthusiasm that I can communicate to you. 

As you all know, Katrina was and continues to be the single most 

devastating natural disaster to strike the United States. Recovery 

goes well beyond the cleanup of debris, beyond rebuilding of roads 

and buildings. Recovery will take years. Recovery starts with the 

communities and the people who make up those communities. 

So what do we do first? First, we provide homes for these folks. 

FEMA and many other groups are working on that issue. 

Second, we get the kids back into school. If these kids miss out 

on the remaining school year, then they must repeat the school 

year. No child wants to repeat a school year. If these kids have to 

move up to another community or to another State to stay in 

school, they will. Parents will follow the kids. Once these kids get 

into another school, another community, and the parents find new 

jobs, new homes, and a new life, they may never move back. Communities die because their life-source, the people, have moved on; 

some because they simply couldn’t find a school. We need to do everything we can to get these kids back into school in the shortest 

time period possible. By today’s date, many schools are back in operation. Some may have fewer teachers, some may have fewer students, some may have less of the resources that they need to do 

an effective job of teaching, but what matters is that the kids are 

in school and are learning again. And what matters most is that 

these kids are getting some level of normalcy back into their lives. 

We have several stages of devastation related to schools and libraries in the affected areas; little or no damage and we are able 

to open back up soon thereafter; minor damage and opened—reopened several days or even a few weeks later; sustained significant damage, and repair will take weeks or months, but will be 

able to reopen before the school year is out; sustained major damage or total destruction and will have to be demolished or rebuilt. 

The rebuilding may take several years. 

19

In some of these cases, schools were able to relocate in some 

other facility and resume classes. I have heard of one school that 

is now located in an empty Wal-Mart building. Other schools 

merged with another school that had the space and resources to accommodate. Other schools simply closed and students relocated to 

parts unknown. 

What can the FCC and the E-rate Program do to help these 

schools and yes, these libraries get back into operation? E-rate can 

only serve a very small need in a situation of many needs. What 

comes first? Buildings, lights, books, teachers, pencils, paper, 

buses, fuel, or Internet access. I think the answer is obvious. But 

we need to get these kids back to where they were before, as disadvantaged as they may be. 

Put yourself into the seat of fourth grade student. You used to 

live in Biloxi, Mississippi. Today, you are sitting in a class in Tupelo, Mississippi. All of your friends are scattered and you have no 

idea where. You haven’t seen any of your teachers since August the 

28th when you and your family drove north to escape Katrina. Suddenly, your teacher in Tupelo calls you over to one of the computers 

in the back of the room, and right there in front of you is the face 

of your English teacher from Biloxi smiling at you from a video 

conferencing classroom in Greenville, Mississippi. Imagine the job. 

Interactive video between classrooms to connect the student to a 

teacher, that, good people, is what the FCC and the E-rate Program can do. 

Time is critical. We need all the help we can get. We hope that 

all of this help is close to what we will ultimately need. We know 

that Chairman Martin issued a statement on September 15 that 

promised 90 percent discount for those affected schools, and that 

a special Katrina window would be forthcoming. A special window 

is needed because the current funding year window for services, 

July 1, 2005 through June 30, 2006, is closed. Thus the need for 

a new window to give the affected schools and libraries the opportunity to apply for discounts E-rate eligible services to replace services and equipment lost, or to better serve the students that they 

have retained or absorbed. But how are we, meaning the FCC, 

USAC, SLD, and the E-rate coordinators, service providers, and the 

schools and libraries gong to manage this process? 

Under current rules and normal circumstances, the technology 

plan is the foundation from which the applications are based. Contracts are based upon a documented procurement process. But 

what if all school and district documentation is now scattered 

northward through the countryside or floating somewhere out in 

the gulf? How can we be sure if schools and libraries only apply 

for what they need to get back to where they were before Katrina 

struck? 

We cannot base post-Katrina needs on pre-Katrina applications 

because many schools, due to their discount level, have never been 

funded for internal connections equipment or wiring. Now, under 

Katrina rules, those schools are eligible to replace equipment and 

wiring they purchased outside of E-rate. How long should this special Katrina relief effort take before we are done? Well, how long 

does it take to demolish, disinfect, rebuild, and repopulate a community? 

20

How will monies set aside for this special Katrina relief affect 

the other schools and libraries across the country? It has been proposed that FCC use—that they use rollover funds, funds that were 

committed but not spent in previous years, but are still available, 

to be used for the special Katrina window. This would provide $365 

million to pay for services requested by the affected schools and libraries during the period of September 1, 2005, just after Katrina, 

through June 30, 2006, the remainder of this funding year. If this 

funding mechanism were chosen, the current demand estimate and 

the current funding request would not be affected. 

Are there any other sources of funding, outside of what the other 

applicants have requested? Yes. Many of the affected schools and 

libraries will be unable to use the funding they have already been 

approved for, and funding they have not yet been granted. The 

services referred to here are those for funding period July 1, 2005 

through June 30, 2006. Those dollars should be identified, and can 

be identified, and used to help fund the Katrina window. 

What should happen after this special Katrina window closes and 

the schools and libraries have not been rebuilt? An affected entity 

should be granted this relief until they are back to where they were 

before August 29, no matter how long it takes. Those affected 

schools and libraries should apply during the regular funding year 

window, just as everyone else does. Don’t create a new process, but 

do provide priority application review and funding to those entities. 

If this becomes known as a special Katrina window or special 

Katrina relief effort, then where is the special oversight going to 

come from? As complex and confusing as the Katrina situation is, 

it would not be fair to the other schools and libraries in the country 

to be adversely affected by prioritizing limited resources of USAC 

and FCC with the Katrina relief. Special circumstances call for special considerations. We all want this special E-rate process to stay 

within the current rules and regulations the E-rate Program where 

possible. We know there must be some special considerations due 

to the lost documentation and lost equipment, but the SLD application process should not be compromised. The affected States fully 

recognize the need for additional scrutiny. We have committed—we 

the States have committed to provide a level of oversight that has 

never been available before. The State E-rate coordinators will 

verify which entities fit the criteria as an affected entity, will verify 

that they seek only services that will restore them back to the level 

they were before, and will verify the procurement process that led 

to the service contract within legal confinements of State law, and 

will assist in the posting of needed SLD application forms, specifically the Form 471. Specific hands-on training and support will be 

provided to each applicant, and we submit that no application 

should be approved without the certified verification of the State Erate coordinator. 

Should schools and libraries that have not applied previously for 

E-rate discounts be allowed to participate in the Katrina relief? Absolutely. Don’t further penalize them because they didn’t have the 

resources or the needed discount level that would allow them to 

participate now. 

My main point is, I don’t want you to call me back up here in 

3 years and ask me why the Katrina relief effort failed. Thank you. 

21

[The prepared statement of Gary Rawson follows:]

PREPARED STATEMENT OF GARY RAWSON, MISSISSIPPI E-RATE COORDINATOR, 

MISSISSIPPI DEPARTMENT OF INFORMATION TECHNOLOGY SERVICES

I have been the e-rate coordinator for Mississippi since the program began in 

1998. I also serve as the Chair for the State E-rate Coordinators Alliance (SECA) 

which is made up of approximately 90 e-rate professionals representing 39 states. 

As you all know, Katrina was, and continues to be the single most devastating 

natural disaster to strike the United States. Recovery goes well beyond the cleanup 

of debris, beyond rebuilding of roads and buildings. Recovery will take years. Recovery starts with the communities and the people who make up those communities. 

So, what do we do first? 

First, we provide homes for these folks. FEMA and many other groups are working on that issue. 

Second, we get the kids back into school. If these kids miss out on the remaining 

school year then they must repeat the school year. No child wants to repeat a school 

year. If these kids have to move to another community or another state to stay in 

school, they will. Parents will follow their kids. Once these kids get into another 

school, another community, and the parents find new jobs, new homes, and a new 

life, they may never move back. Communities die because their life source, the people, have moved on; some because they simply couldn’t find a school. 

We need to do everything we can to get these kids back into school in the shortest 

time period possible. By today’s date, many schools are back in operation. Some may 

have fewer teachers; some may have fewer students; some may have less of the resources they need to do an effective job of teaching. But what matters is that kids 

are in school and are learning again. And what matters most is that these kids are 

getting some level of normalcy in their lives. 

We have several stages of devastation related to schools and libraries in the affected areas. 

1) Sustained little or no damage and able to reopen as soon as power was restored. 

2) Sustained minor damage and was able to reopen after a few days of repair work. 

3) Sustained significant damage and repair will take weeks or months, but will be 

able to reopen before the school year is out. 

4) Sustained major damage or total destruction and will have to be demolished and 

rebuilt; the rebuilding may take several years. 

In some of these cases schools were able to relocate in some other facility and resume classes. I have heard of one school that is now located in an empty Wal-Mart 

building. Other schools merged with another school that had the space and resources to accommodate. Other schools simply closed and students relocated to parts 

unknown. 

What can the FCC and the e-rate program do to help these schools and yes, these 

libraries get back into operation?1E-rate can only serve a very small need in a situation of many needs. What comes first... buildings, lights, books, teachers, pencils, 

paper, buses, fuel . . . or internet access. I think the answer is obvious. But, we need 

to get these kids back to where they were before, as disadvantaged as they may be. 

Put yourself in the seat of a 4th grade student. You used to live in Biloxi Mississippi. Today, you are sitting in a class in Tupelo Mississippi. All of your friends 

are scattered and you have no idea where. You haven’t seen any of your teachers 

since August 28th when you and your family drove north to escape Katrina. Suddenly, your teacher calls you over to one of the computers in the back of the room, 

and right there in front of you is the face of your English teacher smiling at you 

from a video conferencing classroom in Greenville Mississippi. Imagine the joy. 

Interactive video between classrooms, to connect a student to a teacher. That, 

good people, is what the FCC and the e-rate program can do. 

Everyone in the country is asking the same questions: ‘‘Why don’t those Katrina 

folks let the FEMA money, and the insurance money and those billions of dollars 

Congress has approved fix everything?’’ That is a very good question. Here is my 

response:

1) FEMA pays a percentage (75% last I heard) of the depreciated value. 

2) FEMA takes a very long time to pay. 

3) Insurance pays the depreciated value, less the deductable, IF the insurance company decides the losses were covered under the policy. 

4) Often, insurance has a cap on what it will pay. Here, we are talking large dollars 

that simply go beyond the scope of some insurance. 

5) Congress has approved the funding, but where is the money? 

22

Time is critical. We need all of the help we can get. We hope that all of the help, 

and we have been blessed with a lot of help, is close to what we will ultimately 

need. 

We know that Chairman Martin issued a statement on September 15th that 

promised a 90% discount for those affected schools and that a special Katrina Window would be forthcoming. A special Window is needed because the current funding 

year Window, for services July 1, 2005 through June 30, 2006 is closed. Thus, the 

need for a new Window to give the affected schools and libraries the opportunity 

to apply for discounts on e-rate eligible services to replace services and equipment 

lost, or to better serve the students they have retained, or absorbed. 

But, how are we, meaning the FCC, USAC, SLD, the e-rate coordinators, service 

providers, and the schools/libraries going to manage this process? 

Under current rules, and normal circumstances, the technology plan is the foundation from which the applications are based. Contracts are based upon a documented procurement process. But, what if all school and district documentation is 

now scattered northward through the countryside, or floating somewhere out in the 

gulf? How can we be sure schools and libraries only apply for what they need to 

get back to where they were before Katrina struck? 

We cannot base post-Katrina needs on pre-Katrina applications because many 

schools, due to their discount level, have never been funded for internal connections 

equipment or wiring. Now, under Katrina rules those schools are eligible to replace 

equipment and wiring they purchased outside of e-rate. 

How long should this special Katrina relief effort take before we are done? Well, 

how long does it take to demolish, disinfect, rebuild, and repopulate a community? 

How will the monies set aside for this special Katrina relief affect the other 

schools and libraries across the country? It has been proposed to the FCC that rollover funds (funding that was committed, but not spent, in previous years, but is still 

available) be used for the special Katrina Window. This would provide $365 million 

to pay for services requested by the affected schools and libraries during the period 

September 1st, 2005 thru June 30th, 2006. If this funding mechanism were chosen 

the current demand estimate, and the current funding requests, would not be affected. 

Are there any other sources of funding, outside of what the other applicants have 

requested? Yes. Many of the affected schools and libraries will be unable to use the 

funding they have already been approved for, and the funding they have not yet 

been granted. The services referred to here are those for funding period July 1st 

2005, through June 30th, 2006. Those dollars should be identified and used to help 

fund the Katrina Window. 

What should happen after this Special Katrina Window closes and the schools and 

libraries have not been rebuilt? An affected entity should be granted this relief until 

they are back to where they were before August 29th, no matter how long it takes. 

Those affected schools and libraries should apply during the regular Funding Year 

Window just as everyone else does. Don’t create a new process. But, do provide priority application review and funding to those entities. 

If this becomes known as the Special Katrina Window, or Special Katrina Relief 

Effort, then where is the ‘‘Special Oversight’’ going to come from? As complex and 

confusing as the Katrina situation is, it would not be fair to the other schools and 

libraries in the country to be adversely affected by prioritizing the limited resources 

of USAC and FCC with Katrina relief. Special circumstances call for special considerations. We all want this special e-rate process to stay within the current rules and 

regulations of the e-rate program, where possible. We know there must be some special considerations due to lost documentation and lost equipment, but the SLD application process should not be compromised. The affected states fully recognize the 

needs for additional scrutiny. We have committed to provide a level of oversight that 

has never been available before: the state e-rate coordinators will verify which entities fit the criteria as an ‘‘affected’’ entity, will verify they seek only services that 

will restore them back to the level they were before, will verify the procurement 

process that led to the service contract (within the legal confinements of state law), 

and will assist in the posting of the needed SLD application forms (specifically the 

471). Specific hands-on training and support will be provided to each applicant. We 

submit that no application should be approved without the certified verification of 

the state e-rate coordinator. 

Should schools and libraries that have not applied previously for e-rate discounts 

be allowed to participate in the Katrina Relief? Absolutely. Don’t further penalize 

them because they didn’t have the resources or the needed discount level that would 

allow them to participate now. 

If this special relief were granted today, how long before schools and libraries felt 

the benefit? If the relief were granted today, and the Special Katrina Window 

23

opened tomorrow morning, 471s would be filed tomorrow evening, and those applicants would anxiously wait for a Funding Commitment Decision Letter (FCDL). 

Will the existing e-rate process work in this special case? Absolutely. 

I don’t want you to call me back up here in three years and ask me why the Special Katrina Effort failed. 

I want to sincerely thank you for the opportunity to speak with you today.

Mr. WHITFIELD. Thank you, Mr. Rawson, and I thank all of you 

for your testimony. 

Ms. Zaina, I want to just start of questions with you this afternoon. Mr. Stupak, in his opening statement, mentioned the fact 

that the requirement for expenditures to reconnect these schools 

and libraries may be such that it may be required to, for other 

schools and libraries around the country, that they may not receive 

the funding that they expected because of the special needs in the 

Katrina area. I think there is something referred to as an overflow 

fund, and I would ask you, is Mr. Stupak’s concern a legitimate 

concern for us, or how do you decide when to use the overflow fund 

and so forth? 

Ms. ZAINA. Sir, the overflow fund, it is the rollover fund and it 

would be used at the recommendation of the FCC. Essentially, the 

rollover fund is basically the residual left from the contingencies 

that we build into the program, whether or not there will be appeals monies available and the like. And currently, that rollover 

fund is at $365 million. So whether we use the rollover fund, affects the magnitude of the effect on the other schools and libraries 

in the country, as compared to those in the gulf States. The $2.25 

billion, if we were to take it out of that and not use the rollover 

fund, they would be immediately directly affected. If we use the 

rollover funds, the magnitude might be different, depending upon 

how the commission tells us to use the rollover funds. 

Mr. WHITFIELD. Okay. And that would be the decision of the 

FCC? 

Ms. ZAINA. Yes, sir. 

Mr. WHITFIELD. Okay. Now, on September 21, 2005, you sent a 

letter to the chairman and the commissioners at FERC, and I think 

everyone has a copy of this, in which identified certain areas of 

concern that would have to be addressed as we try to respond to 

the needs created by Hurricane Katrina. Have your concerns been 

met that you express in this letter? 

Ms. ZAINA. Mr. Chairman, we sent that letter on September 21 

in order to allow the commission to deliberate about all of the concerns we felt would be necessary for them to consider as they 

transferred or created this proposal and turned it into an order 

that could be operationalized. We asked questions about eligibility. 

We asked questions about programmatic issues. We asked questions about implementation. And to date, we have not had any discussions with the commission regarding those issues that we 

raised. We have, however, had discussions with the commission on 

the September 28 order, the September 28 letter that we sent pursuant to their waiver order about—with the deadlines. 

Mr. WHITFIELD. And without objection, I am going to ask that 

this—your letter be placed into the record. Yes, all three of you. All 

three of them. Thank you. 

[The information referred to follows:]

24


24253.001
25


24253.002
26


24253.003
27


24253.004
28


24253.005
29


24253.006
30


24253.007
31


24253.008
32


24253.009
33


24253.010
34


24253.011
35


24253.012
36


24253.013
37


24253.014
38


24253.015
39


24253.016
40


24253.017
41


24253.018
42

Mr. WHITFIELD. Mr. Rawson, the FCC states that it is considering relying upon FEMA determinations to identify schools and libraries that should be eligible for Katrina-related relief. Does every 

school in the FEMA zone need E-rate assistance, or have you been 

able to assess that? 

Mr. RAWSON. Yes, we have assessed that. No, every school in the 

FEMA-defined region does not need E-rate support or even rebuilding. There is minor damage and considerably lesser chance of damage to E-rate-eligible services. There may be schools that are fairly 

close to the coast that sustained very minor damage. And then you 

go 150, 200 miles inland and you will have another school that was 

damaged considerably by trees or wind damage to the roof or flooding or whatever it might be. So no, we have already surveyed all 

school districts who, in turn, let us, the State, the State Department of Education, know the level of damage for all entities. 

Mr. WHITFIELD. And what percent of the schools in that—in the 

FEMA-designated area would you say needed assistance? 

Mr. RAWSON. We haven’t done a calculation of the percentage. It 

is—it is just various schools and with various damage. 

Mr. WHITFIELD. Okay. 

Mr. RAWSON. And some minor, some major. 

Mr. WHITFIELD. Have you come to the conclusion on the amount 

of money that may be needed in the schools that do have needs? 

Mr. RAWSON. No, we have not, because the needs vary and certainly within the E-rate application, the data provided through 

that, that is—that doesn’t provide the information we need, either, 

because many of the schools haven’t used the E-rate funds to provide their infrastructure. 

Mr. WHITFIELD. And how would explain or define or describe the 

coordination between the FCC, USAC, and your colleagues following the Katrina relief proposals? 

Mr. RAWSON. Well, up to this point, there is not really a Katrina 

proposal that we know of, that we have been told about, we, being 

the applicants. So we are waiting on an order from the FCC, and 

then we will react accordingly. 

Mr. WHITFIELD. Okay. Okay. 

Mr. RAWSON. May I add one more thing, though? We, being the 

tri-State area, Alabama, Mississippi, and Louisiana, did submit a 

proposal for Katrina relief to the FCC. And I think——

Mr. WHITFIELD. Yes. Would you elaborate on that? When did you 

do that? 

Mr. RAWSON. Oh, goodness. I have forgotten the date, but it is—

it was about the 18th of 20th of September. As a matter of fact, 

the day that he came out with the original order on the 15th, we 

were scurrying to get our Governors to sign the letter. And the 

15th was a Thursday, and the following Monday is when we submitted to the FCC. 

Mr. WHITFIELD. Yes. Mr. Navin, let me ask you, when you all formulated this relief plan, which all appreciate your doing very 

much, how did you, for example, determine that there would be 600 

schools that might be affected? 

Mr. NAVIN. At the time that the chairman announced his intention to present an item to his fellow commissioners about a relief 

package, we had been contacted at that point by the Governors of 

43

Mississippi and also Louisiana, and in addition, I believe, the superintendent of schools for the State of Alabama. They were all 

asking for some special consideration by the commission relating to 

E-rate funding. I believe that using historical data, we were able 

to come up with a figure of approximately 600 schools, and we 

looked at the type of priority to funding that those schools demanded or requested in earlier years. 

Mr. WHITFIELD. Now, do you have any idea of when the final 

order will be completed? 

Mr. NAVIN. I know that the chairman has sent a proposal to the 

other commissioners. I know that they are continuing to debate 

some of the finer points of that proposal. For me to put a timeframe on it, I think it would be unfair to those deliberations, but 

I will say that they have certainly engaged on the finer details of 

the order, and they recognize the urgency of getting the order out 

as soon as possible so that the relief in the order gets to the affected areas as soon as possible. 

Mr. WHITFIELD. Ms. Zaina, have you had any discussions with 

them on timeframe for the final order? 

Ms. ZAINA. No, sir, we haven’t. 

Mr. WHITFIELD. Okay. So, Mr. Navin, since the announcement of 

the program, have you consulted or been in pretty detailed discussions with USAC about possible implementation of the program or 

not? 

Mr. NAVIN. My staff is in daily contact with USAC on a variety 

of issues. We also, having received the letters from USAC raising 

various questions, have tried to incorporate those issues into the 

draft item where possible—where it was possible to do so. So we 

certainly have recognized those issues. The chairman has requested 

that, to the best of our ability, we address those issues in the item. 

Mr. WHITFIELD. Okay. Well, my time has expired, so I will recognize Mr. Stupak for 8 minutes. 

Mr. STUPAK. Thank you, Mr. Chairman. 

Mr. Navin, you testified that you are committed to making sure 

that USF monies are used and are well spent and the program is 

protected from potential fraud, waste and abuse. Yet our subcommittee’s investigation found a program rife with waste, fraud 

and abuse, and the FCC IG remains concerned that Katrina rebuild will result in more abuse, especially when you testified that 

there will be regulatory relief which, in my mind usually means 

less controls and more possibility to open up for fraud. So what is 

the status of the planned 700 audits that were promised? It is my 

understanding that the they were at the chairman’s office from 

March until August 15, and where have they gone now? Who is 

holding those things up? 

Mr. NAVIN. That might be a question better put to the FCC’s IG. 

One of the things Chairman Martin has tried to do early in his——

Mr. STUPAK. Okay. Well, let me go to Mr. Feaster, then. Do you 

know the answer, of who has the audit reports now? 

Mr. FEASTER. Yes, sir. Excuse me. The plan was held up, the 

three-way plan you are referring to——

Mr. STUPAK. Right. 

Mr. FEASTER. [continuing] and audits, was held up during the 

transition from Commissioner—Chairman Powell to Chairman 

44

Martin. During that time, the general counsel’s office found that 

the way that the people were selected for—the contractors were selected, there were two flaws in the selection process. This was presented to me in consultation with the chief of the Wireline Bureau 

and the commission’s managing director. We felt it was best to recomplete the thing, re-complete the contract application. And we 

expect to have a final contract within 90 days in place to start on 

those audits. 

Mr. STUPAK. This final order that the chairman is trying to get 

done and have the commissioner sign on how they are going to rebuild, shouldn’t we have a good understanding of what is in those 

audit reports before you do a final order, because aren’t we bound 

to repeat the same errors? 

Mr. FEASTER. I think we have some background based on about 

150 audit reports that we have done to date. And any changes in 

the processes and procedures, we would apply to those new audits 

so we—they would be in our audit plan to look at those type of situations. 

Mr. STUPAK. And I don’t mind them helping to rebuild, but I 

don’t want to build on a program that we have had a lot of problems or discussions on, if we are just going to do another rebuilding 

on flawed foundations. So let me ask this question, Mr. Navin, if 

I can. Puerto Rico Telephone I mentioned in my opening statement, 

about $1,500 per month they charged for hundreds of lines, even 

though they weren’t used. Have you or the commission been put on 

notice that telecom or other Internet service providers are priority 

one services; that they will not be paid for connections that are unusable during this time they have been down due to the hurricane, 

or are we still paying $1,500 a month for these lines? Do you know? 

Mr. NAVIN. I don’t know the answer to that specific question. 

What I can say is that one of Chairman Martin’s first priorities 

when I became bureau chief was to take a look at the Universal 

Service Program and consider fundamental structural reform of the 

program, for purposes of addressed both Congress’ and the IG’s——

Mr. STUPAK. Sure. But in your opening, you mention all this 

stuff about you were immediately getting things back in repair and 

all this, and did anyone check to see, are you still paying for lines 

that aren’t being used? 

Mr. NAVIN. During the outreach, it is my understanding from 

some of the personal outreach that I did, that carriers were asked 

for consideration on that issue. I don’t have any statistics in front 

of me right now that I can I provide you concerning the number 

of carriers who agreed to stop billing and the number of carriers 

who said no, we were under a contract and we are gong to continue 

to bill. 

Mr. STUPAK. So they could, under contractual obligations, continue to charge $1500 and we really have no recourse other than 

they are good heartedness. Will that be changed in the new—in 

this final order that is coming up? I mean, that is just one example 

of just waste, if the thing goes down, and not to any fault of theirs, 

but I mean, should we continue to pay? 

Mr. NAVIN. We are certainly aware of that issue, and I do not 

know whether the final order will specifically address that or not. 

45

Mr. STUPAK. Well, I hope you express our concerns. Of the 600 

libraries and schools you have identified, are all these schools and 

libraries going to be rebuilt, or are some of them not going to be 

rebuilt? Do we know that yet? 

Mr. NAVIN. I think the answer is, we don’t know that, and I 

think what is important on this point is that, what our order proposes, or what the chairman’s proposal does, is to make these 

schools and libraries eligible. It doesn’t guarantee them support, 

and to the extent a school or library is not rebuilt, then they will 

not be filing for additional support under priority two for internal 

connections. 

Mr. STUPAK. You know, we mentioned a little bit about the rollover rate there, that $360 million that rolls over. I am not quite 

sure how disadvantaged—disadvantaging, I should say—other 

schools nationwide is the best policy to pursuing—to be pursued 

here. Isn’t there any other place we can subtract money from? For 

instance, won’t there be an E-rate money from 200? And then that 

is the rollover money. Why couldn’t we just use those—that money 

instead of obligating other school districts’ promised money to rebuild the gulf? 

Mr. NAVIN. I think it is difficult for any of us to say what the 

exact impact is going to be at this point in time because of the cash 

management system that is used at USAC. It is——

Mr. STUPAK. So then, why won’t we start with the rollover money 

so we don’t impact other promised money? 

Mr. NAVIN. Well——

Mr. STUPAK. Use that first until we know. 

Mr. NAVIN. [continuing] there is currently enough money in the 

fund today to cover all priority one requests. 

Mr. STUPAK. Including those in other parts of the country? 

Mr. NAVIN. Correct. Yes, for priority one requests, that is true. 

For priority two requests——

Mr. STUPAK. Correct. 

Mr. NAVIN. [continuing] what our order proposes to do is to recognize that those schools and libraries in the disaster area are now 

some of the neediest schools in the country. 

Mr. STUPAK. Sure. 

Mr. NAVIN. And therefore we treat them as such. 

Mr. STUPAK. But before you commit that money, we should probably determine how many schools and libraries there are, when 

they are going to open, and the extent of the damages. It sounds 

like Mississippi has done some of that, Mr. Rawson, and I am sure 

there has got to be some of them there that just aren’t going to 

open because of lack of population and other things, and putting 

an expensive system in a school that may or may not open, or even 

doing the basic wiring wouldn’t be worth it right now. Is that fair 

to say? 

Mr. RAWSON. Well, we don’t know. We have to go back and build 

the schools and see who comes back. 

Mr. STUPAK. Sure. 

Mr. RAWSON. You know, right now, the people in the communities aren’t there because there is little community left, in some 

cases. But you build the school back and then hopefully your teachVerDate 0ct 09 2002 11:33 May 05, 2006 Jkt 000000 PO 00000 Frm 00049 Fmt 6633 Sfmt 6602 F:\DOCS\24253.TXT HCOM1 PsN: JOEP
46

ers come back, and the students come back when you get some 

semblance of normal community life. 

Mr. STUPAK. But I am sure that Mississippi and others aren’t 

going to build a school and hope they come. I mean, you are going 

to have some kind of foundation that people are going to be returning. And again, I am sure we all want them back as soon as possible, but some of these areas, it is going to take a long time before 

they get back. So I don’t want to be committing funds for a school 

that may or may not ever come back, and then the rest of the priority two or someone gets pushed back for another year. See, that 

is what I am concerned about. We all want to help out, but this 

is what, about our fourth or fifth hearing, and it seems like everyone is promising money and no one knows where it is going or 

when it is going to be spent, and we are asking everyone else to 

step back. And I have no problem with that, I just want to make 

sure there is a plan, that there is a proposal, that we really know 

what we are talking about instead of just throwing money at it. 

That is why I am a little perplexed why we wouldn’t have the audit 

report, which shows all the problems we have, before we startup 

a program again in a massive area, in which we are waving regulations. I just think we are throwing good money after bad at times. 

Mr. RAWSON. That is a good point, sir, but you know, which 

comes first, the chicken or the egg? But you go back and you build 

Gulfport back. If you don’t put the school back, then the people 

aren’t going to come back to Gulfport, or Biloxi or any of the other 

places that are devastated. The school is part of the restructure 

and it has to be. 

Mr. STUPAK. Absolutely. For many communities, it is the heart 

and soul of that community. But at the same time, there has to be 

some plan on areas we are going to rebuild and not rebuild, too. 

Mr. RAWSON. That is true. And while I have got your attention, 

could I give you some statistics related to what you just——

Mr. STUPAK. Sure. 

Mr. RAWSON. [continuing] asked a minute ago? The libraries that 

were destroyed and the schools that were destroyed, you were asking that question. 

Mr. STUPAK. Right. 

Mr. RAWSON. In Alabama there was one library and one school 

destroyed. In Louisiana there were four libraries destroyed, 82 

schools destroyed, 70 libraries damaged, and 229 schools damaged. 

In Mississippi there were six libraries destroyed, 28 schools destroyed, 29 libraries damaged, and 280 schools damaged. And recognize that when we wrote this, when we came up with these statistics, we couldn’t get into Louisiana and couldn’t get into New Orleans to do an assessment there. 

Mr. STUPAK. Sure. 

Mr. RAWSON. But there is another 212 schools and 13 libraries 

that were not part of this assessment. 

Mr. STUPAK. Well, I agree. And you know, the President says we 

are going to rebuild New Orleans, and we have an opportunity to 

make it the new modern city, but that doesn’t mean those same libraries will be in those same locations, and those same schools will 

be in those same locations. So before we start committing and obligating funds that we may not have and impact the rest of the NaVerDate 0ct 09 2002 11:33 May 05, 2006 Jkt 000000 PO 00000 Frm 00050 Fmt 6633 Sfmt 6602 F:\DOCS\24253.TXT HCOM1 PsN: JOEP
47

tion, maybe we ought to figure out where the places the libraries 

and schools are going to be before we make these commitments and 

withhold funds from other parts. And I certainly appreciate the answers from everybody on this panel. 

Thank you, Mr. Chairman, for your patience. 

Mr. WHITFIELD. And I might also add that it is our intention to 

offer everyone a second round of questions as well. So at this time, 

I recognize Ms. Blackburn for 11 minutes. 

Ms. BLACKBURN. Thank you, Mr. Chairman, and I want to thank 

all of you for being here today. And, Mr. Chairman, I thank you 

for holding the committee and convening this for us today, because 

we all do have concerns about the E-rate Program, and we know 

it has some problems with waste, fraud and abuse. 

Mr. Rawson, I will tell you, I was in Jackson and Meridian, Mississippi this week, on Tuesday, and I will tell you, it makes me 

proud, for you all, for how you are approaching this issue of recovery, cleanup, reconstruction, and I am appreciative for the thoughtful approach that the Mississippi citizens are using as they move 

forward, and a lot of commonsense that they are bringing, and that 

is reflected in your remarks and I thank you for that. I will tell 

you, there is a little bit of head scratching going on down there, as 

to why FEMA would do some of the things they are doing, like buying trailers for portable schools from Alaska and hauling them 

down to Mississippi. You know, it doesn’t make a whole lot of 

sense. And I learned a lot being there on the ground. 

Let me ask you this. The E-rate Program money, is that going 

to be used for Internet connectivity in these portable school buildings? And also, you mentioned putting the students and teachers 

together via the Internet. How much money are you designating for 

wireless connectivity? I know, as you look at a lot of what has happened in Mississippi, and the hard-line phones are not up, the cell 

service is sporadic, this is an opportunity to rebuild and rebuild it 

right. And, Mr. Navin, I certainly wish that the FCC, in your 

points, you have three points of things that Chairman Martin, in 

his aggressive agenda, is putting forth, but you don’t mention anything about rebuilding it right. And I think all of us would have 

liked to have seen something about innovation and doing it right. 

While you have the opportunity to do it right, for goodness sakes, 

let us do it right. 

But back to my point, Mr. Rawson. What are you all doing with 

wireless technology as you rebuild? 

Mr. RAWSON. Well, we leave that up to the individual school districts and schools to request whichever they want. Yes, there has 

been much talk about going back now, because we are starting 

from scratch in many cases, and putting wireless, particularly in 

the situation where we have temporary services set up, so that 

Wal-Mart that I mentioned in my write-up, they put in wireless 

there at the Wal-Mart, then when they move back to the renovated 

building or repaired building, they can take that wireless technology back with them, rather than hardwiring the temporary locations and then abandoning it when they leave. 

Ms. BLACKBURN. Okay. That sound great. Now, Ms. Zaina, looking at wireless versus a traditional hardwired system, has USAC 

48

performed any cost benefit analysis on the hardwired system 

versus the wireless system? Have you done any of that work? 

Ms. ZAINA. We have not done any analysis, Congresswoman, but 

we do look at the cost of the proposal as one of the most important 

issues for an entity to be looking at when they do ask for schools 

and libraries’ funding. 

Ms. BLACKBURN. Okay. Mr. Feaster, thank you for being with 

our committee again. I know we have kind of worn you out over 

the last few weeks. We have lots of questions and you have lots of 

answers, and we appreciate your time. Are you going to be putting 

any full-time staff into Louisiana or Mississippi for onsite audits 

and use of the E-rate funds? 

Mr. FEASTER. No, I have no plans to do that. You need to remember that my staff totals—my total staff is 10 people, and there is 

four people working in the four areas of the USF, so we have quite 

a small staff. We do have one of my staff on almost continuous 

travel to assist the U.S. attorneys in investigations. 

Ms. BLACKBURN. So you have one staff member, basically, that 

is designated? 

Mr. FEASTER. Yes. 

Ms. BLACKBURN. Well, maybe we need to look at taking some of 

those USF funds and re-designating some of those to cover the expenditure——

Mr. FEASTER. That would be an excellent idea. 

Ms. BLACKBURN. [continuing] of those funds so that we are auditing that money as we go. I think that is probably, for the record, 

the third time you have made us aware——

Mr. FEASTER. Yes. 

Ms. BLACKBURN. [continuing] on the size of that staff. I think it 

is beginning to sink in, sir. And then let me ask you this. There 

again, bearing in mind that we are aware that you have a small 

staff, what kind of up-to-the-minute review or ongoing auditing are 

you going to do on uses of the equipment that is being purchased 

through the E-rate Program, and then putting that into facilities 

and being certain that the equipment is going into facilities that 

actually exist, and that they are in the facilities where students are 

actually sitting, that these aren’t ghost facilities or misdirected facilities? 

Mr. FEASTER. Well, right now we are working with USAC. They 

are conducting 200 audits of various beneficiaries. In our three-way 

proposal, or three-way plan, where we will do 710 audits, we will 

have 250 audits of the beneficiaries. What I would plan to do in 

the next 6 months is that we would ask USAC auditors to, as we 

do a statistical survey based on the 700, to do some focused audits 

in some of the areas down in the New Orleans area. And in our 

typical audit, we always look at how the equipment is being utilized, whether it is hooked up and whether there is people there 

using it, and that is pretty much in all our audits. 

Ms. BLACKBURN. Let me ask you this. As you go through the bid 

process, is there a part of the contract that requires a description 

of how the beneficiary is going to use that equipment and for how 

long? 

Mr. FEASTER. The tech plan, and, Lisa, stop me if I am—I should 

give this one to you, really. 

49

Ms. BLACKBURN. Sir, would you prefer for Ms. Zaina to answer 

that? 

Mr. FEASTER. I would think she could answer it better than I 

could. 

Ms. BLACKBURN. Okay, I will be happy to redirect the question. 

Ms. Zaina? 

Ms. ZAINA. You asked a question about whether or not an entity 

is going to be using equipment in a certain fashion. 

Ms. BLACKBURN. Right. If you require a description for how the 

beneficiary plans to use that equipment, details on where it is 

going to be used, how much detail you are asking for in the bid 

process on the front end, so that you have got something in your 

audit, your working——

Ms. ZAINA. Yes, we ask a very comprehensive set of questions 

about how the—how that equipment is going to be used, how the 

funding is going to be used. We have a very comprehensive application process, a very comprehensive invoicing process on top of that. 

In addition, we started an initiative this year, Congresswoman, 

that we are visiting a thousand schools and libraries, determining 

whether or not these schools and libraries are using the funds appropriately. 

Ms. BLACKBURN. Okay. That is great. Thank you for your answer 

on that. I have just a little bit of time left. Mr. Navin, I want to 

come back to you, and it is not really a part of the E-rate Program, 

but I have continued to hear some questions about these handsets, 

the wireless handsets and the 300 minutes, and some questions on 

that program and how you all went about that. And I would like 

to know a little bit about what kind of oversight is in place on that, 

and monitoring the use for that, and how you are qualifying the 

residents. I think there are still a lot of questions that are out 

there. And I would also like to know what other alternatives you 

all might have considered, other than that handset program. 

Mr. NAVIN. I will once again try to answer your question as specifically as I can, while respecting the ongoing deliberations at the 

agency. You were referring to the commission’s proposal, or the 

chairman’s proposal under the Low-Income Program to provide consumers in the disaster-affected area with a wireless handset, and 

I believe what we announced is that it would be a minimum of 300 

minutes and the handset for $130. And what we have done, or as 

the idea has evolved, is, I think, that we have provided some additional flexibility in the order for carriers to provide these low-income consumers with other types of plans. 

As it relates to the auditing or, you know, particular safeguards 

that we have adopted, relating to that particular plan, I would 

point out that we are, in the first instance, relying on FEMA’s disaster designations and application processes to determine the eligibility for the temporary support, and the checks and balances that 

are build into FEMA’s internal controls and procedures, to ensure 

that parties are either eligible or ineligible for FEMA support. 

Similarly, we targeted the temporary support to the counties and 

parishes and individuals that have suffered the most from the disaster, and I believe that we will be able to identify the counties in 

the order that are affected. 

Ms. BLACKBURN. Thank you, sir. Mr. Chairman, I yield back. 

50

Mr. WHITFIELD. Thank you. At this time, I will recognize the 

gentleman from Washington, Mr. Inslee, for 8 minutes. 

Mr. INSLEE. Thank you, Mr. Rawson, and I am sorry I wasn’t 

here for your whole testimony. But I just wonder if you can address 

this issue of using rollover funds. Apparently, there is $365 million 

available, and I just wondered if that makes sense to use that and 

what affect it would that have on other potential recipients. 

Mr. RAWSON. Yes, that does make sense because, if the $365 million rollover funds, which is funding that is left over from previous 

years, if that were used, it would not affect any of the FCDLs or 

funding commitment decision letters, that are in place now for the 

other applicants throughout the country, and also future commitments that are under review at this point. It would totally separate 

the Katrina window and the Katrina window funding from what is 

not in process, and life goes on for the rest of country. 

Mr. INSLEE. And forgive me for this layman question, but I assume there are other potential recipients of those rollover funds 

who would not be getting it because they went to the Katrina relief 

effort. It is not a zero-loss situation, I assume. 

Mr. RAWSON. Absolutely. If you take them from somewhere, you 

know, somebody has got to give it up. But that is true, if the funds 

are not used, then it rolls back into the general, or to the—added 

to the $1.25 billion, so yes, that is correct. 

Mr. INSLEE. Okay. And could you give us any flavor for what percentage other districts can anticipate reduction or foregone receipts 

as a result of this relief effort through E-rate? 

Mr. RAWSON. The only way to do statistics is to know the overall 

requests that will come from this, and we have no way of knowing 

that at this time. But I would think, out of $2.25 billion available 

to commit, then what we are talking about here would hardly be 

missed. 

Mr. INSLEE. By individual districts? 

Mr. RAWSON. That is correct. 

Mr. INSLEE. Okay. Now, this is maybe the—not the most welcome question, but let me ask it anyway. Does it—if we want to 

make this commitment to the Nation’s system that are benefited by 

the E-rate Program, is there argument that we should really—instead of using E-rate funds for this, use general appropriations out 

of disaster relief so that we don’t diminish, even to a small amount, 

the commitment to the other function? 

Mr. RAWSON. I have been asked that question many times, and 

my response has always been, yes we have FEMA funds, but there 

are problems with FEMA, about delays in getting funding and 

FEMA only pays a certain percentage after you take depreciation 

into consideration. Then there is individual school district insurance, the same thing there, depreciated value, the delays in getting 

funding. We are trying to get these schools back in operation now, 

or as soon as possible. E-rate, as convoluted as some of you may 

think, it is still a clean process. And if we can use the E-rate funds 

to get that small portion of the needs of the school back in place, 

we could do that much sooner than we can going through any of 

these other vehicles that we have available. And speaking of all the 

billions of dollars committed, I don’t know about you, but I haven’t 

seen an armored truck yet go south with any money in it. 

51

Mr. INSLEE. So I may have missed this. You may have talked 

about this. But do you have any kind of brackets at all about the 

numbers we would be talking about to have sort of an extraordinary response? 

Mr. RAWSON. The numbers of what? 

Mr. INSLEE. Of the amount that we would be putting in from Erate dollars to Katrina response. 

Mr. RAWSON. We don’t know yet. We have done an assessment 

of some of the damage, but we don’t know what it is going to cost 

to put those services back in yet. We know a lot about the equipment, we know the connectivity they had, but we have not done individual school site assessments of what it is going to take to get 

them back to where they were before. 

Mr. INSLEE. And I will be happy if some of those E-rates are used 

to provide people access to the NOAA site, from the National Fluid 

Dynamics Laboratory that predicts a one-half increase in intensity 

of hurricanes in the next several decades due to global warming. 

So I will hope you will plug these students into that, in fact, maybe 

some Members of Congress, too. Thanks a lot. 

Mr. RAWSON. Well, actually, we have been doing that. 

Mr. WHITFIELD. Thank you, Mr. Inslee. At this time, I will recognize the gentleman from Oregon, Mr. Walden, for 8 minutes. 

Mr. WALDEN. Thank you very much, Mr. Chairman. And I appreciate our panelists today testifying on this very important issue 

and, Mr. Chairman, your leadership on this issue as well. As you 

know, this subcommittee, over the last 2 years, has investigated 

the E-rate Program. Some of you are painfully aware of that. And 

we will be putting into the record tomorrow in a meeting the report 

that is now in draft form regarding the E-rate Program and concerns that we have. And obviously, a lot of what we have found 

over the years in investigating is just this lack of communication 

and maybe even a relationship between the FCC and USAC. 

I am a bit concerned, as I look at how this program was rolled 

out, that it seemed to come out by press release first with communication second. And I understand to a certain extent the desire of 

all Federal agencies to step up and respond to this very horrific 

hurricane and the tragedy that has ensued thereafter, and to do everything possible and kind of cut through the red tape to get things 

done. 

But, Mr. Navin, maybe you can explain. How did the FCC come 

up with the numbers that it came up with, $132 million that is referenced in the news release? How reliable do you think that number is it? Was that done in close coordination with USAC? Why 

don’t we start there. 

Mr. NAVIN. We certainly obtained the historical data from USAC, 

and what we did is we looked at the schools and libraries in the 

disaster-affected area. 

Mr. WALDEN. Right. 

Mr. NAVIN. And based upon historical demand, under priority two, we made the estimate of $132 million. But it is just an estimate. 

Mr. WALDEN. How confident are you in that number? 

Mr. NAVIN. Again, I think, because of the cash management system at USAC and the way we fund priority one and priority two 

52

services, it would be difficult to specify today exactly how much is 

going to be—you know, how much is going to be requested. We 

make them eligible to request. We don’t know——

Mr. WALDEN. Okay. 

Mr. NAVIN. We know that it will not exceed the $2.25 billion cap. 

Mr. WALDEN. Well, I would, yes, hope not, just in the wake of 

Katrina. There are other schools out there in need as well, and I 

guess that raises the next set of issues, which is, we have been 

supplied with the letters USAC wrote to the commission on, I 

guess, perhaps the 16th of September and then again on the 21st, 

raising a lot of questions about—pardon me—the FCC roll out of 

the news release, saying, here is what we are going to do, and 

waive all these things. And then USAC has come forth with a long 

laundry list of questions. And I know you have already been asked 

about this to a certain extent. Do you have answers for these yet? 

Mr. NAVIN. What I can tell you for certain is that we have reviewed those questions, and to the best of our ability tried to reflect, in the order, answers to those questions. 

Mr. WALDEN. Now, following the issue of the order, I believe 

there was yet another letter from USAC detailing additional issues 

of concern and questions. Before you issued the order, does the 

FCC sit down with USAC and talk about this stuff, or do you guys 

just share letters back and forth? How does this work? Maybe, Ms. 

Zaina, do you want to talk about that? What is this relationship? 

Ms. ZAINA. Sir, under these circumstances, as per the Katrina 

situation, we were asked by the commission on September 1 and 

2 to provide the commission with some data, which included deadlines for the program——

Mr. WALDEN. Okay. 

Ms. ZAINA. [continuing] included recipients of the program——

Mr. WALDEN. All right. 

Ms. ZAINA. [continuing] in the affected areas. And then we became aware of the chairman’s proposal on September 15, when we 

were monitoring the open meeting, and on September 16, sent the 

letter saying we have, you know——

Mr. WALDEN. A lot of questions. 

Ms. ZAINA. [continuing] ideas for you so that you can consider 

them as you deliberate, as you move this proposal and turn it from 

a proposal into an order. And because of the—knowing that this 

wanted—this was something that the chairman——

Mr. WALDEN. Right. 

Ms. ZAINA. [continuing] wanted to move quickly, we thought it 

would be expedient if we were to provide a letter with the list of 

issues that we have, hoping to have a discussion about them. We 

did not have a discussion about the letter from September 21 with 

the commission, but the September 28 letter, sir, that you have 

mentioned, is a letter that was in response to the commission’s 

waiver deadline order, and we have had a—we have had a couple 

of conversations with the commission regarding that order, but we 

have not discussed the September 21 issues. 

Mr. WALDEN. All right. I have only got a couple of minutes here, 

so let me try and be brief. Mr. Navin, okay, the commission says, 

in the wake of Katrina, we are going to waive these rules and expedite this help to schools and lord knows, they need the help. How 

53

about Rita victims? I mean, I hear from people that there is a problem in Texas with schools. We know the problems of hurricanes 

that have occurred in Florida. We don’t get many of them up in the 

northwest in Oregon, fortunately, but all this will impact what is 

in the fund and I assume delay other projects in other schools elsewhere. Does this set a precedent that now it will be used, and how 

are you going to deal with Rita victims? Has the commission reviewed that? 

Mr. NAVIN. Fortunately for the FCC, unfortunately for the folks 

in Texas and western Louisiana, we were very well prepared for 

Rita, and we started our outreach related to Rita very early in the 

process. We called public safety answering points and made sure 

that they had contingency plans in place. We called all the carriers. 

Mr. WALDEN. Right. 

Mr. NAVIN. This was all before the disaster struck. We have continued that outreach effort. We have continued the outreach effort 

to western Louisiana——

Mr. WALDEN. Good. 

Mr. NAVIN. [continuing] as well as to Texas. And I am sure that 

there are individual carriers who have been——

Mr. WALDEN. But what about——

Mr. NAVIN. [continuing] harmed substantially, but we have not—

what I was just going to say is, to contrast the two situations, in 

the wake of Katrina, we received letters from several public officials in Louisiana, Mississippi, and Alabama. In the wake of Rita, 

we did not receive similar inquiries or similar proposals related to 

that. 

Mr. WALDEN. You will after this hearing. But in all seriousness, 

if you are waiving these rules and expediting the application process and moving money around to deal with broken schools or missing schools in Mississippi and Alabama and Louisiana or wherever, 

I want to make sure I understand it. Are you saying you are not 

expanding that to schools that are similarly destroyed in the wake 

of Rita, or were there none? Maybe there weren’t any. I don’t know. 

Mr. NAVIN. Congressman Walden, what I can tell you is, if someone brings a proposal to the FCC, or someone presents evidence to 

us to show that that is a remedy that we should be considering as 

it relates to Rita, I am sure that Chairman Martin would deliberate that proposal and present it to his colleagues. I can tell you 

that the order that they are currently considering does not include 

disaster areas related to Rita. 

Mr. WALDEN. But wouldn’t you say it sets a precedent for similar 

areas that are similarly—I mean, nobody has been similarly destroyed as in the wake of Katrina, but if you are in Small Town, 

Mississippi and your school is out in the gulf now, and you are in 

Small Town, Texas and your schools is washed up the road somewhere, it is the same effect. 

Mr. NAVIN. And perhaps the difference is, in the wake of 

Katrina, the disaster was so widespread, some global order resolving the situation for all schools was perhaps more appropriate. The 

agency does have a waiver process for individual circumstances, 

like the circumstances that you are suggesting. So schools would be 

free to use that waiver process to bring any damage or special circumstances to the commission’s attention. 

54

Mr. WALDEN. Why couldn’t they have used that waiver process, 

then, if it is functional and effective in Mississippi and Louisiana? 

Mr. NAVIN. I think, because of the number of entities involved, 

carriers——

Mr. WALDEN. Right. 

Mr. NAVIN. [continuing] schools, customers, that it would have 

been very difficult to use that waiver process, which is really for 

individual or unique circumstances. And the circumstances in the 

aftermath of Katrina were common among all of these parties. 

So——

Mr. WALDEN. All right. 

Mr. NAVIN. [continuing] it lent itself to a more global resolution. 

Mr. WALDEN. All right. Thank you, Mr. Chairman. I know my 

time has expired. 

Mr. WHITFIELD. Thank you. At this time, I will recognize the 

gentleman from Mississippi, Mr. Pickering, for 8 minutes. 

Mr. PICKERING. Thank you, Mr. Chairman. I want to welcome 

Mr. Rawson from Mississippi up here, and all the panel. And I do 

want to put everything into context, that we need to have these 

schools rebuilt, and a critical component of that is the communications capabilities, the Internet access; of having a good functioning 

school in an area that has been devastated, that lost its critical infrastructure; that lost, in many of the schools, not only the school 

buildings, but all the documents. And so what we are talking about 

today is very important. People will come home when they can 

send their children to school. Rebuilding their school needs to be 

a critical first priority. There needs to be a sense of urgency about 

it. It is appropriate, in times of crisis, to waive rules that make 

sense in normal circumstances, but do not make sense in a crisis 

circumstance and disaster. 

The second context is that you need to coordinate and communicate with the people most affected, as you develop your rules or 

your waivers, or we find a more streamlined way to get help to the 

schools in the rebuilding effort, but to do it in a way that you maintain the accountability standards. And I think that we can achieve 

those things, and I want to talk to Mr. Rawson, and then the other 

members of the panel, to see what is the most effective way for us 

to achieve these objectives. 

Mr. Rawson, since Katrina, have you had any communication coordination from the FCC or from any other Federal entity, as it relates to your proposals on E-rate? 

Mr. RAWSON. No, I have not. 

Mr. PICKERING. No communication? 

Mr. RAWSON. No direct communication from them. We have submitted a proposal to them, which you have a copy of, but nothing 

from them coming back to us. 

Mr. PICKERING. Okay. No one initiated communication with you, 

and no one has responded to your communication to them? 

Mr. RAWSON. That is correct. 

Mr. PICKERING. That is correct. And this is a disaster, and we 

have an urgency here, and it is unacceptable not to communicate 

and not to coordinate with the most affected parties first. Do you 

think that the FCC estimate of $132 million is accurate, is inacVerDate 0ct 09 2002 11:33 May 05, 2006 Jkt 000000 PO 00000 Frm 00058 Fmt 6633 Sfmt 6602 F:\DOCS\24253.TXT HCOM1 PsN: JOEP
55

curate? What are the needs based on, the schools in Mississippi, 

and as you talk to your colleagues in Louisiana and Alabama? 

Mr. RAWSON. We don’t know what the accurate figure would be. 

It would take a considerable amount of assessment at the individual schools to see what they had before and what they need 

now, and there is so many variables, temporary services, the kids 

moving to another school, will they come back? There are many, 

many variables involved. We cannot put a dollar figure on it now. 

Mr. PICKERING. My understanding is that the $132 million estimate is based on last year’s applications, is that correct? 

Mr. RAWSON. I believe it is. 

Mr. PICKERING. Now, $132 million is based received applications, 

based from in a stable situation with whole schools, under normal 

circumstances. I would assume that the $132 million, when you 

have lost everything, is not an accurate projection. Would that be 

a fair assumption, Mr. Rawson? So you would say that the needs 

would probably be greater than $132 million? 

Mr. RAWSON. I would expect, me, I would say that I would expect $132 million for the three States would not be enough. One factor 

about the estimate that was provided, that is a verifiable number 

and that is a good thing. We always want verifiable numbers. But 

the variable to that is, there were many schools, especially along 

the coast and various other places, that did not apply for internal 

connections last year because their discount was too low. Or it 

could be, you have a 90 percent school in central Mississippi that 

was destroyed. They didn’t apply for internal connection last year 

because they already had what they needed. The wiring is in place, 

the equipment is in place. So last year’s application figures really 

have nothing to do with what it is going to take to put those 

schools back starting from zero. 

Mr. PICKERING. Now, the underlying service providers, 

BellSouth, the other regional communication companies, they have 

had their complete infrastructure wiped out, is that correct? 

Mr. RAWSON. That is correct. 

Mr. PICKERING. And the capacity of what they have been able to 

restore, on a percentage basis, is still very low, especially in the 

coastal counties along Mississippi. 

Mr. RAWSON. That is correct. 

Mr. PICKERING. So to have comparable capability to what you 

had prior to Katrina is going to require significant investment, not 

only from the private sector, but for the E-rate to give functional 

equivalencies to your schools, is that correct? 

Mr. RAWSON. That is correct. 

Mr. PICKERING. Before—Mr. Navin, before the FCC revises its estimate, it seems to me that you should talk to the affected people 

in Mississippi, Louisiana, and Alabama, before you can make accurate projections so that we as policymakers know what is going to 

be needed to help rebuild the capabilities that existed prior to 

Katrina. 

The other thing is that the failure to communicate and coordinate shows a lack of urgency. Now, I have been dealing with FEMA 

a good bit, and I can tell you that the people in the States are very 

frustrated because it takes so long to get what is needed, because 

you have to go through so many regulatory red tape, bureaucratic 

56

hurdles. And I would hope that the FCC would want to take lessons learned from sister agencies and try to streamline this process 

as quickly and as effectively as possible, while maintaining accountability. But let us get help to the people in a quick way, in 

an effective way, without a lot of red tape, so that these schools can 

get up and running and that the parents will bring their—not only 

their families back, the children back to the schools, but the economy of those regions. The economy needs the parents for the jobs, 

and the parents need the schools for their children, and we have 

got to do both. 

Three hundred and sixty-five million dollars now exists in a rollover fund, is that correct? Would it make sense—if we are trying 

to do this quickly, would it make sense to send that directly to the 

affected States, to an appropriate entity, whether it is the E-rate 

coordinators or to the State Departments of Education, and let 

them spend it as quickly as possible without all the red tape? Mr. 

Rawson? Or some portion of that $365 million. It wouldn’t compete 

with any other States, but we could take the $365 million or some 

number that people can agree to, whether it is $132 million or $200 

million or $250 million or $300 million, send it to the States that 

are affected, send it to the State Departments of Education or the 

E-rate coordinators, and let you all certify, do your accounting, 

your documentation, with FCC consultation, but let us cut to 

through the red tape, get the money and let you rebuild your school 

and hook up to the Internet. Would that be quicker? Wouldn’t that 

be better? 

Mr. RAWSON. It would be quicker. The oversight, the management of that would be a significant and a tremendous burden on 

the State to do so. Then the other part you have to consider is 

making sure you don’t make it competitive between the States or 

among the States; that is fair to all the entities that were involved. 

So there would be some issues, but I will be honest with you, I 

thought I thought of everything, but you floored me on this one. 

Mr. PICKERING. If we did it that way, who would do the oversight? Who would do the monitoring so that everybody in the country could say, this money went quickly, it went effectively, but 

there was no fraud and abuse? Who would do the backend accountability under that proposal? 

Mr. RAWSON. If you keep it under the guidelines of the current 

system, as far as electrical service is concerned and what is eligible 

for E-rate discounts, then there would have to be a mirroring between the State and FCC and USAC. We couldn’t—I don’t think we 

could divorce ourselves from that. What good is it to steal E-rate 

funds? But as far as oversight of managing the funding and who 

is eligible and how much they get and what they replace, then the 

States could do that. They could certainly do that. 

Mr. PICKERING. Would it be quicker, then, to, through the next 

supplemental appropriation bill, take from the $365 million, give it 

to the States, but do it based on current FCC guidelines and standards, and FCC accountability at the end? 

Mr. RAWSON. It would be quicker, but what is the audit process 

in the back of that to make sure the funds were used appropriately? 

Mr. PICKERING. That would give you both——

57

Mr. RAWSON. Yes. 

Mr. PICKERING. [continuing] quick, efficient, compassionate release of the funds, with accountability assured by everybody. 

Mr. RAWSON. Correct. 

Mr. PICKERING. Thank you, Mr. Rawson. 

Mr. WHITFIELD. Thank you, Mr. Pickering. Your testimony and 

the questions asked, I am sure, raised some additional issues with 

members of the panel. And so, Mr. Inslee, would you have any additional questions you would like to ask at this time? Mr. Walden, 

do you have any additional questions? 

Mr. WALDEN. I do, Mr. Chairman. 

Mr. WHITFIELD. You are recognized for 5 minutes. 

Mr. WALDEN. Mr. Chairman, I would like to ask a question of 

Mr. Feaster. In your discussion, in your testimony here, sir, page 

15, you talked about this process and the audits, and you know 

that is obviously something this subcommittee has been very interested in over the last couple of years since we have done our investigation, and I wonder if you can detail for me, what was it that 

caused Chairman Martin to put a halt to the contracting process 

when he took over? Because, you know, there had been discussions 

before this subcommittee about how this was online and ready to 

go and all of that. Can you speak, or maybe Mr. Navin can, as to 

why? 

Mr. FEASTER. What I was told during that, the 3-month process 

that was held, it was under review by the chairman’s office. Then 

I was later presented with a memorandum from the general counsel’s office that listed some problems they had and concerns that 

they had with the regional procurement. 

Mr. WALDEN. Is there not a procurement process in place——

Mr. FEASTER. Well——

Mr. WALDEN. [continuing] for this sort of contracting? 

Mr. FEASTER. This was, as we keep referring to it as three-way, 

is between——

Mr. WALDEN. USAC. 

Mr. FEASTER. [continuing] my office, USAC, and a contractor. 

And USAC’s process does not exactly duplicate the FCC’s procurement——

Mr. WALDEN. I see. 

Mr. FEASTER. [continuing] process. And you may want to ask 

Lisa, again, if she agrees with that or not. 

Mr. WALDEN. Do you agree with that? 

Ms. ZAINA. Congressman, I am not completely familiar with our 

procurement process. All of the steps that we take, we try to follow 

as many of the procurement process. And for instance, in the FAR 

requirements, as the Federal acquisition requirements, as we can. 

So we mimic that, in a sense. And I understand, from what I hear 

Mr. Feaster saying, possibly, is that there were bidding issues regarding the involvement of the FCC as per the FCC and not necessarily in the process itself. I don’t know if that is what I am hearing or not. 

Mr. WALDEN. Mr. Navin, can you speak—is it Navin or Navin? 

I am sorry. 

Mr. NAVIN. Navin is the actual correct pronunciation. 

Mr. WALDEN. Navin. 

58

Mr. NAVIN. But one of my ancestors determined to turn to it to 

Navin for some reason. 

Mr. WALDEN. Oh, so it doesn’t matter. 

Mr. NAVIN. So it won’t sound like an Irish name. 

Mr. WALDEN. Yes, all right. Can you speak to this? I am just perplexed. I mean, that was several months ago. We have been pushing hard, as you know——

Mr. NAVIN. Sure. 

Mr. WALDEN. [continuing] about getting these audits going. This is a program that has what, $2 billion-plus allocated every year 

and 158 audits. That is about 20 a year that get done. And 34 percent of them, according to your own data, show there is problems. 

I mean, we have had recoveries of $30 million or something. What 

is the hiccup? 

Mr. NAVIN. Well, much of this occurred before I came into my 

current position. 

Mr. WALDEN. All right. 

Mr. NAVIN. I started in May of 2005, thereabouts. It is my understanding that the memo that was presented to Inspector General 

Feaster was—those concerns were memorialized in a memo fairly 

recently, but that the concerns were raised sometime earlier in the 

process. So that very well may explain why it got held up. 

Mr. WALDEN. And when was that? When was it held up, Mr. 

Feaster? 

Mr. FEASTER. Well, March through——

Mr. WALDEN. June? 

Mr. FEASTER. Later than that. Actually, the memo was dated August 16, I believe. So it was being held at least until that period. 

Mr. WALDEN. When did that process start to recruit an auditor 

among the three of you? How long does this take to get done right? 

I mean, I am starting to feel a little frustrated. 

Mr. FEASTER. The answer to that question is 90 days. That is the 

choice we made, thinking that——

Mr. WALDEN. I know, but how far back does this go? When did 

you start this three-way audit process under the prior chairman? 

Mr. FEASTER. It was 2004. 

Mr. WALDEN. When in 2004? 

Mr. FEASTER. The spring, late spring, I believe. 

Mr. WALDEN. Do you see why I am frustrated——

Mr. FEASTER. Yes, sir. 

Mr. WALDEN. [continuing] and why this committee is? 

Mr. FEASTER. I am frustrated, also. 

Mr. WALDEN. I mean, I am not up here to preach at you, but you 

know, this stuff is hard to explain at home, it really is. 

Mr. FEASTER. I understand that. 

Mr. WALDEN. And you know, to have started just figuring out 

how to get an auditor hire, the contract, in the spring of 2004, it 

is October of 2005 and you are telling me it is 90 days 3 months 

from now, right? 

Mr. FEASTER. As we have said several—as I have said several 

times to the committee, we had to go through a second-best process. I have said on several occasions, that we need to do, aggressive 

oversight, is direct access to the USF, the fund. 

Mr. WALDEN. And I don’t disagree with that and——

59

Mr. FEASTER. And somehow keeps not happening each year. 

Again, in 2006, it was eliminated from our budget request. 

Mr. WALDEN. By the Congress? 

Mr. FEASTER. By the Congress, yes, sir. And that forced us into 

a little convoluted situation with the development of this three-way 

plan. 

Mr. WALDEN. My time has expired. Sorry. 

Mr. WHITFIELD. Mr. Pickering, do you have an additional round 

of 5 minutes? 

Mr. PICKERING. I do. Mr. Navin, if we wanted to the regular order, when would the $211 million announced by the commissioner, the chairman, when do you think that that order will be 

done, and the rules for establishing a Katrina fund and the processes by which that is going to be done, when do you think that 

will be complete at the FCC? 

Mr. NAVIN. As I mentioned before, the order, some of the finer 

details of the order are still being debated among the chairman and 

his fellow commissioners. So I don’t want to give a specific time period. What I can tell you is, we are late in the process. We have 

dotted many I’s and crossed many T’s, but at the same time, for 

me to set a specific period of time would really infringe upon their 

deliberative process and I don’t want to do that today. 

Mr. PICKERING. Two weeks, 4 weeks, 6 weeks? A frame of reference that——

Mr. NAVIN. I personally would be—given the speed with which 

we put the order together, given the speed with which the chairman and his colleagues were able to come to a unanimous consensus on agreement in principle, which in part explains why there 

was not a lot of back and forth with Mr. Rawson, was because the 

four commissioners, or the three commissioners and the chairman 

agreed with his position. So hopefully you will see that reflected in 

the item. But I think that we are very—we are close. 

Mr. PICKERING. And so once that order is completed and is close, 

then the schools in the States would apply, and you would see disbursements by when? 

Mr. NAVIN. I think I defer the disbursement question to Ms. 

Zaina. But I can tell you that the order will be effective upon release, if the Office of General Counsel allow us to do that. 

Mr. PICKERING. Ms. Zaina? So once they did their order, how 

long would it take you to help the schools in Mississippi? 

Ms. ZAINA. Mr. Pickering, we want to be able to disperse those 

funds as quickly and efficiently and as effectively as we can, with 

a mind toward program integrity. And I have not had an opportunity to review anything beyond the press release from the chairman on September 15. So questions about eligibility, programmatic 

aspects, and implementation are critical for us to be able to answer 

and have answered, and I was very pleased to hear Mr. Navin say 

that they took our September 21 letter and they worked very closely from it, in order to establish and craft an order based on this. 

But decisions made on those sorts of things, programmatic, the eligibility, and implementation issues are critical for us to be able to 

move this money out to the people who are in the greatest need. 

Mr. PICKERING. If we were to do a supplemental appropriation in 

the first 2 weeks of November, do you think that you all will have 

60

the program up and running and dispersing funds by the first 2 

weeks of November, given where you are in the regulatory process, 

and given what you need for program integrity? 

Ms. ZAINA. Mr. Pickering, it would depend on, first of all, what 

the details of the commission’s proposal is, because we can’t make 

policy. That is something USAC can’t do. What we do is administer 

the program. So the commission would first have to make the policy, we would first have to understand what that policy is, and 

then we would be able to craft something to disperse those funds. 

Mr. PICKERING. Let us say the FCC complete its work in 2 

weeks, so you have your policy guidelines within 2 weeks, would 

you then be able to disperse to the people and the schools in Mississippi before Thanksgiving? 

Ms. ZAINA. I can’t answer that question, Mr. Pickering, because 

I don’t know if all of the answers have been given to the questions 

we raised for purposes of deliberation of the commission. 

Mr. PICKERING. You know, this—Mr. Chairman, this is the same 

type of answers we get on getting our people help through FEMA, 

and it is just—and there is nothing wrong with the current process 

or the current agencies. Good people and a good process in normal 

times. But the Federal Government and rapid response don’t go together. And so that just creates a lot of frustration for people who 

need immediate help to rebuild their communities. And the communities all along the Mississippi coast, the Gulf Coast, they don’t 

have any tax base. It was completely wiped out. And so they are 

going to have to depend on getting the Federal resources to rebuild 

our infrastructure, schools, highways, and our communication capability. And what we are trying to do is to have some degree of certainty as to when this is going to happen so that we can plan the 

rebuilding. 

And so I hope that you all would all coordinate closely together, 

the policy side, the administrative and implementers of the policy, 

and the recipients and those who are going to be doing it at the 

local and State level. And that coordination really needs to be improved. I appreciate the commissioners’ quick announcement in trying to move this regulatory process. But if we could have better coordination and greater certainty, that helps the emotional wellbeing as well the recovery of the people most affected, and I would 

urge you all to do that. 

Mr. WHITFIELD. Mr. Pickering, thank you very much. And I 

would, after listening to all of this today, one thing that is clear 

is that all of us have the best intentions, but we know that the 

school systems in Mississippi, Alabama, and Louisiana are now 

going to be rebuilt without assistance from this program, and not 

going to be reconnected. And I think Chairman Martin acted with 

all good intentions, but I think it is very clear from this hearing 

today that there has been—there is no final order. We don’t know 

when the final order is going to be. There has been a lack of communication between the FCC and USAC, and vice versa, and certainly there has been a lack of communication between Mr. 

Rawson, as the contact person for the government of Mississippi, 

and I guess he submitted a report and request for Alabama and 

Louisiana as well. 

61

And so despite all of these good intentions, it appears that we 

are not very far down the road when it comes to really offering relief to the needed school systems, and recognizing that some of the 

schools have already been destroyed, some of them are in makeshift schools, temporary schools, where they are meeting now, and 

I recognize the complexity of the issue, but it is quite clear from 

the hearing that we are a long way from delivering much of anything, to be truthful about it. And I would hope that within the 

next 2 weeks, that Chairman Martin and others, Mr. Navin, maybe 

you could get this information to them, that we would like an opportunity, Mr. Pickering and others on the Oversight Committee, 

and other affected members on the Energy and Commerce, to have 

a meeting and maybe you all could give us a more precise update 

on what is taking place, when do we expect some action on it? So 

if you all would take that back and get back in touch with us, we 

would appreciate it. 

I would also say that we are going to leave this record open for 

30 days. Mr. Stupak may have some additional questions. We 

found out that there was an avian flu briefing going on by Secretary Leavitt. It started at 3:15 and he had to get up for that. So 

we are going to leave it open for any additional questions that 

someone may have for the panel. 

And I do thank you for being here. We appreciate your sincerity, 

and I think you would agree with us that we are a long way from 

being very effective at fulfilling the commitment that we have 

made to the people and school children of Mississippi, Louisiana, 

and Alabama. 

With that, the hearing is adjourned. 

[Whereupon, at 4 p.m., the subcommittee was adjourned.]

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