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Published in Print: May 14, 2003, as Tennessee's One-Stop E-Rate Shop Faces Federal Scrutiny

Tennessee's One-Stop E-Rate Shop Faces Federal Scrutiny

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Nearly all Tennessee school districts get their key telecommunications services as easily as a shopper loading up at the local convenience store.

Under a state contract, the Nashville-based Education Networks of America Inc. manages a one-stop shop of speedy Internet access, maintenance of network connections, and a telephone "help desk"—all statewide.

Some school administrators call the unusual arrangement convenient and thrifty. It also spares them the formidable paperwork required by the federal E-rate subsidies that pay for 70 percent of the cost of the services. The state does all that paperwork, and pays the remaining 30 percent of the cost.

But the handy setup is now under scrutiny, causing school districts across the state to worry that their Internet services could be scaled back at any time.

Education Networks of America is being examined by state and federal investigators, who subpoenaed company documents in December. Because of that investigation, E-rate funding for Tennessee districts has been in limbo since last July.

Cut off from an estimated $1.2 million in monthly E-rate subsidies, the company warns that it might slash services for schools to a minimum level at any time.

'Public Relations Problem'

The investigation centers on the company's winning of a five-year state contract in 2002, according to David Pierce, who became the president of ENA last October, after the contract was awarded.

Recent stories in the Tennessee news media allege that the company's chairman and chief executive, Al Ganier, used his ties to then-Gov. Don Sundquist, whose term ended in January, to manipulate the state's procurement system and steer the contract away from an out-of-state competitor and toward the company.

Addressing those allegations, Mr. Pierce said: "It is a fact that our founder, Al Gainer, was a lifelong friend of former Governor Sundquist. As far as I know, that's not a crime. It's also a fact that no charges have been filed."

Mr. Ganier remains with the company, but has turned over its day-to-day management to Mr. Pierce, according to Mr. Pierce.

"I see this as a public relations problem that has turned into a cloud that's making release of funds for the state's application [be] held up," Mr. Pierce said.

As is its practice, the Universal Services Administrative Co., the quasi-governmental agency that manages the education-rate program from its headquarters in Washington, would not comment on investigations or pending funding decisions.

In an unusual move, the state is asking the Federal Communications Commission, which oversees the E-rate, to intervene.

State officials sent a letter, dated April 17, to the FCC, saying that "there has not been any evidence presented to the state with regard to any state or ENA misconduct related to the state's procurement process or its selection of ENA as its service provider."

The letter, signed by the Washington-based counsel for the state, William K. Coulter, asks the FCC to grant "immediate relief" by allowing the state to designate another company that would receive and disburse the E-rate money so that services to the state's "900,000 students, 100,000 educators, and 1,900 schools" would not be disrupted.

"In Tennessee, grading systems, advanced- placement exams for seniors, year-end testing, teacher and student e-mail, and required teaching programs to remote schools are all reliant on the Internet," the letter noted. "In many cases, classes in remote areas are 'paperless' and 'professor-less,' exacerbating the dire and urgent nature of this request."

'A Tremendous Cut'

In an interview last week, Mr. Pierce of ENA said that his company was running out of money. It laid off 30 of its 77 employees in March.

"At some point, you run out of cash," he said.

The company's network that serves schools has operated at full capacity since July, but it might be cut to 30 percent, under a provision in the state contract.

Mr. Pierce said the timing of the service cut was "indeterminate," but said it could happen before the end of the current school year.

Peggy Guy

"That would be a tremendous cut," said Peggy Guy, the technology coordinator of the 70,000-student metropolitan Nashville school district, which has about 16,000 computers connected to the system.

Ms. Guy said her district uses the system regularly for instruction, test preparation, and for conducting some student assessments.

"We are dependent on it," she said, "It would be a tremendous blow to us to have the service reduced."

Van Latture, the technology director in the nearby, 3,800-student Franklin school district, said that even if a cut didn't occur until after June 7, the last day of school, it would cause problems because "we begin staff development the next day."

The Franklin district purchases online subscriptions to educational resources that would be hard to access without the full level of Internet service, he said.

Another Tennessee district put all its instructional money this year into online subscriptions, added Mr. Latture, who is also the chairman of the Tennessee Education Technology Association. "They'd be devastated," he said.

The FCC has received the state's request, but is not required to act on it or to follow any timetable. However, the FCC was soliciting public comments about the state's request until May 5.

"We're working to actively make a decision as soon as possible," said Michael Balmoris, an FCC spokesman.

Meanwhile, BellSouth Telecommunications Inc. has agreed in concept to serve as the manager of the E-rate money until the issues are resolved.

Coverage of technology is supported in part by the William and Flora Hewlett Foundation.

Vol. 22, Issue 36, Page 20

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