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Published in Print: April 30, 2003, as FCC Moves to Purge Corruption From E-Rate

FCC Moves to Purge Corruption From E-Rate

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Moving against "waste, fraud, and abuse" in the E-rate, the Federal Communications Commission decided last week that the $2.25 billion federal program would start "debarring," for three years or more, "persons convicted of criminal violations or held civilly liable for misconduct arising from participation in the program."

Supporters of the E-rate, which subsidizes the cost of telecommunications for U.S. schools and libraries, endorsed the decision to rule such "persons," a term covering entities such as school districts and vendors, ineligible for E- rate funds. But they said it was merely a first step, and too long in coming.

"We were disappointed that the FCC didn't move quicker in this area, and we think some of the controversy could have been averted if it had taken action faster," said Keith R. Krueger, the executive director of the Consortium for School Networking, a national, Washington-based group of school technology officials.

Charges have aired recently in the news media, echoed by some members of Congress, that wrongdoing has taken root in the program. ("E-Rate Program Put Under Numerous Microscopes," April 9, 2003.)

Questions have centered around whether the commission and the Universal Services Administrative Co., or USAC, the small, nonprofit company that the FCC appointed to run the program, have enough resources to monitor the more than 40,000 applications annually for E- rate funds.

Misdeeds identified by USAC include instances in which school districts have worked too closely with particular vendors on their E-rate applications, cribbed technology plans wholesale from other applicants, and purposely requested duplicative services.

Another part of the April 23 FCC order clarifies that duplicative requests—to provide the same services to the same people, at the same time—will not be financed. Vendors and applicants caught at those and other practices have been denied E-rate aid, but could still seek funding in other applications and in subsequent funding years.

In a joint statement, Mr. Krueger and Don Knezek, the chief executive officer of the International Society for Technology in Education, based in Portland, Ore., called last week's order "a credible, incremental step today to address the E-rate's program integrity issues."

But Mr. Krueger said the commission should apply even stronger measures to protect the E-rate's reputation, which he and other supporters believe is vital to continued political support in Congress. Lawmakers first authorized the program under the Telecommunications Act of 1996.

One proposed additional step, the joint statement suggested, would be for the FCC to empower itself "to sanction entities that consistently, knowingly, and willfully violate significant program rules."

A limitation of the new order debarring wrongdoers is that it requires a court decision in a criminal trial or civil lawsuit—a high standard, given that no one has yet been convicted or found liable for misdeeds in the 5-year- old program.

Several commissioners agree that more work needs to be done, based on their statements released along with the order, the full text of which will not be available "for weeks," according to an FCC spokesman.

Other Elements

Other parts of the FCC's April 23 order, released in summary form, are designed to streamline the program and ease its administrative burdens on applicants. One part makes voice-mail systems eligible for E-rate support, putting it on par with e-mail, which already was eligible.

The order also spells out that wireless services, such as cellphones and wireless networks, are fully eligible for the E-rate "in the same manner as wireline services," clarifying a murky issue.

Until the FCC weighed in last week, USAC had borne the brunt of responding to the apparent spread of corruption in the program.

The agency announced recently that requests by schools and libraries for federal E-rate support for telecommunications dropped to $4.7 billion for the 2003 program year—which begins in July—down from $5.7 billion for 2002. USAC's managers said the dip was partly a positive result of heightened scrutiny of E-rate applications.

"We have enough experience in the program to know some of the ins and outs [by E-rate participants]," said Mel Blackwell, the vice president for external communications of USAC. "Maybe some of the people who thought they wanted to try [attempting fraud]—not only applicants or service providers, but both of those people—are having second thoughts, I hope."

Another reason for the drop-off, however, was the straitened budgets for schools in most states and localities, Mr. Blackwell said. Districts are having trouble scrounging up their share of the cost of telecommunications projects, which the E-rate lowers by 20 percent to 90 percent, with the greatest reduction going to schools serving the poorest populations.

The FCC also named the members of a new Task Force on the Prevention of Waste, Fraud, and Abuse that will make recommendations this summer. The 14 members include representatives from school and library organizations, consulting firms, and the telecommunications industry.

Despite the $1 billion drop, applicants for 2003 are still asking for far more than the annual limit of $2.25 billion in discounts that the FCC set for the program.

Vol. 22, Issue 33, Pages 31,33

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