Termination of E-rate?? Let's Discuss
Message Posted June 13, 2003

Last week, an E-rate consulting firm sent an e-mail to most of you (I assume it went to everyone that included their e-mail address on a Form 470) citing a recently introduced bill to kill the E-rate program. Based on the volume of inquiries I've received, I can tell this has disturbed many of you. Actually, there are several things happening in DC and this is a good chance to talk about each one of them.

As I mentioned in a previous update, officials from a company called Connect 2 are now in prison for defrauding the program. And in Wave 24, the SLD issued denials worth almost $600 million. Among the denials were applications for IBM (worth $470.2 million), Ameritech Advanced Data Services, Inc. ($27.9 million), BellSouth Communications Systems ($16.7 million) Multimedia Communications Services Corporation ($16.3 million), and Atlanta Datacom Inc. ($11.9 million).

The SLD cited these factors as reasons for the denials:

• "Documentation provided demonstrates that price was not the primary factor in selecting this service provider's proposal." and
• "Services for which funding sought not defined when vendor selected; price of services not a factor in vendor selection per Customer Agreement; price of services set after vendor selection."
  These events have stirred up the E-rate issue among policymakers who are now asking "what drives schools to hire shady consultants," and "how do we limit the amount of waste, fraud and abuse that is supposedly increasing in the program."

These are some of the ways various policymakers are dealing with these questions.

1) Congressman Tom Tancredo (Colorado) introduced H.R. 1252 to, "..terminate the e-rate program..." While this sounds terribly threatening (and it would be if it were passed), the truth is that this bill is introduced each year and hasn't been considered by committee. The reason you're hearing about it this year is because of the events I mentioned earlier.

2) The House Energy and Commerce Committee, led by Rep. Tauzin (R-LA), has begun an E rate investigation and he and Pennsylvania Congressman Jim Greenwood, Chair of the Oversight and Investigations Subcommittee, have issued extensive data requests to the FCC and USAC for documents on product eligibility, appeals, audits, staff training, etc. For those of you in Congressman Greenwood's district, you may want to weigh in with your thoughts of the program.

3) FCC Commissioner Kathleen Abernathy announced a public forum to be held on May 8th to discuss E-rate rules and oversight procedures. It is expected that the forum will focus not only on waste, fraud, and abuse issues, but on other proposed program changes related to a Notice of Public Rulemaking ("NPRM") and related comments initiated by the FCC over a year ago. An announcement of the forum is available at http://hraunfoss.fcc.gov/edocs_public/attachmatch/DOC-232039A1.pdf.

In all, the E-rate program is definitely being scrutinized and may undergo some reforms in the next 6-12 months. My opinion is that the program is not going away, but needs all of the support it can get right now from everyone has benefited from its funding.

Julie Tritt Schell