Companies, Ed. Groups Divided on E-Rate Transparency

By Sean Cavanagh — October 08, 2013 6 min read

Public and private sector leaders agree on many of the broad goals being floated for reshaping the federal E-rate program, but there is little consensus on one, potentially critical issue: Whether telecommunications companies should be required to make more information public about the prices they charge schools for technology.

That question has created a division between education organizations, many of which favor bringing more transparency to pricing, and industry groups who counter that putting prices in circulation would compel them to reveal proprietary information and would lead to skewed cost comparisons in districts with very different characteristics.

The Federal Communications Commission, the agency that oversees the E-rate and is leading a broad review of its policies, has shown an interest in boosting the transparency of spending in the program, which provides about $2.4 billion a year in aid to schools and libraries for telecommunications services.

But ideas it has put forward in a rulemaking notice about publishing information on the prices schools pay for broadband access and other products and services has drawn a skeptical response from telecommunications companies that serve schools.

“It is not clear why the commission is considering this action, and Sprint urges caution in mandating the public filing of E-rate pricing information,” the corporation wrote the FCC in response to the agency’s request for comments. "[P]ublicly available pricing information can be misused or misinterpreted if taken out of context,” and on its own “cannot be used to determine whether an E-rate applicant is getting the best possible price for the services it is requesting.”

Sufficient Information?

But many advocacy organizations disagree, arguing that making more information about technology prices public will make it easier for schools to get services at a cheaper rate—saving money not only for K-12 systems, but also ultimately for taxpayers.

“The FCC has an obligation to make sure all schools are getting the best deal possible,” said Evan Marwell, the CEO of Education Superhighway, a San Francisco-based nonprofit group that seeks to improve schools’ Internet access. “Anything being bought with federal dollars, the pricing should be public. ...When you make information like this public, good things happen.”

Industry officials, in their comments to the FCC, have argued that some pricing information on what schools pay for E-rate technology is already publicly available through the Universal Service Administrative Company, the private entity that administers the E-rate program, and through public-records requests.

But many officials who work with schools say that the current collection of data is piecemeal, at best, and only retrievable in a way that makes it nearly impossible to compare costs across districts and libraries, which are also supported through the E-rate.

“You can get it, but it’s one-bill-at-a-time,” said John Harrington, the CEO of Funds for Learning, an Edmond, Okla., company that consults districts on the E-rate. The data, he added, comes in a “highly scattered, non-homogenized format.”

Making more price information public would make it much easier to study the program’s effectiveness, equity among districts, and why technology costs vary across communities, states, and regions, he said.

Process and Policy

The Federal Communications Commission is considering steps aimed at bringing new openness to several aspects of E-rate spending that could affect schools and the telecommunication companies that serve them.

How should the FCC publicize information detailing schools’ and libraries’ E-rate spending?

Advocates say publishing how program applicants use money would encourage wise spending.

Should the prices that telecommunications companies charge schools for E-rate be made public?

Some argue that doing so would foster a more competitive marketplace, while others fear it could lead to price-fixing and inflated costs for schools.

Should the FCC increase enforcement of a rule barring telecommunications providers from charging schools more than the “lowest corresponding price” for comparable customers?

Many education advocates say the policy is widely ignored, and telecommunications companies say it is unrealistic and unclear.

Is it appropriate to make public companies’ bids for schools’ requests for E-rate services?

Would making companies responses to request for proposals drive down prices, or discourage vendors from participating in E-rate?

Source: Federal Communications Commission

The E-rate program was established by Congress in 1996 as a way to increase telecommunications access for schools and libraries, particularly those in impoverished communities. It provides schools and libraries with discounts on the costs of services.

Backers of the program say it has played a critical role in helping schools shift into the technological age. When the program was created, just 14 percent of classrooms had Internet access. By 2005, 94 percent of all instructional classrooms have web access, according to the FCC.

Greater Demands

But many school officials and elected leaders say the E-rate has failed to keep up with schools’ technology needs, particularly as demands for reliable connectivity have increased with the rise of online testing and digital learning tools, as well as with the proliferation of mobile devices such as tablets, laptops, and smartphones. Among those who hold that view is President Obama, who has asked the FCC to ensure that 99 percent of the nation’s schools have access to high-speed broadband technology within five years.

Over the years, numerous policymakers have called for greater scrutiny of how E-rate funds are spent, in some cases citing examples of mismanagement or fraud in school districts. The FCC rulemaking notice seeks input on how the agency should scrutinize district spending, but federal officials’ questions about transparency also extend to the private sector. The agency asks whether information about companies’ initial bids to provide work, and whether their final contracts to provide work such establishing web access and connections within schools and districts, should be made public.

Mr. Marwell’s organization has tried to circumvent bureaucratic hurdles and collect information directly from a sample of districts about what they pay for various telecommunications services through the E-rate program. While his organization’s research is not complete, preliminary results show enormous variation in the prices districts pay for the same or similar services—even when comparing rural, suburban, or urban systems against districts with similar characteristics and needs, he says.

Education Superhighway has found that those price disparities are often a result of “who’s a better negotiator” with telecom companies, Mr. Marwell said. Districts’ tendency to overpay for services, he argued, is a major financial drain on the E-rate program.

In their notice of proposed rulemaking, FCC officials ask for input on whether making price information public is feasible—or if it might lead to telecommunications providers shunning the E-rate program for fear of not wanting that information shared. They also ask whether publishing prices of E-rate services could “facilitate tacit price-fixing, bid-rigging or market allocation schemes” and thereby inflate schools’ costs.

Industry groups are not the only ones skeptical of requiring more public reporting information on price. The State E-Rate Coordinators’ Alliance, composed of officials who oversee the program in states around the country, in written comments, warns that creating a “virtual bulletin board” could stymie, not increase, competition because fewer vendors will want to take part.

The agency would be better off making sure that an existing policy, the"lowest corresponding price” rule, is enforced, the coordinators argue. That rule says that telecommunications companies cannot charge schools and libraries more than they ask comparable, non-residential customers to pay.

Many education advocates suspect that policy is widely flouted, though they say the lack of public pricing data makes it difficult to know for sure.

Currently, under that rule the burden of proving that a price is unfair “falls on the applicants themselves,” said Sarah Morris, the senior policy counsel for the Open Technology Institute at the New America Foundation, a Washington think tank. The information void, she said, ultimately restricts their options for choosing low-cost providers.

But while Mr. Harrington supports creating more public access to price information, he said he’s wary of making lowest-corresponding price rules more stringent. In many rural systems, he noted, finding a comparable district for a cost comparison is difficult or impossible. He said his experience suggests that districts pay more for telecommunications services because of the terms of the contract—such as whether its length is one-year or three years—rather than the price of equipment or services.

Coverage of the education industry and K-12 innovation is supported in part by a grant from the Bill & Melinda Gates Foundation. Education Week retains sole editorial control over the content of this coverage.


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