In a new development that threatens to further erode public trust and support for the eRate, technology giant IBM Corp. has accused eRate officials of unfairly targeting the company in their effort to rid the program of waste, fraud, and abuse. The eRate is the $2.25 billion-a-year federal program that provides telecommunications discounts to schools and libraries.

Earlier this year, the Schools and Libraries Division (SLD) of the Universal Service Administrative Co. denied more than $710 million in eRate applications for Funding Year 2002 that listed IBM as the primary service provider, because those applications allegedly violated the program's competitive-bidding requirements.

But in appeals filed recently with the Federal Communications Commission (FCC), IBM claims these applications were singled out and held to a higher standard than others during the evaluation process.

Sources familiar with the program say at least some of IBM's appeals appear to have technical merit. But that's only part of the story. Most of the experts who spoke with eSchool News agree that although IBM might not have broken any of the program's explicit rules in these instances, the company almost assuredly has violated the spirit of the rules. Resolving the mess will be a challenge for FCC and SLD officials, they say.

Most of those who spoke with eSchool News insisted on anonymity. "We don't want to be targeted by the SLD," one source explained. "We've got enough troubles of our own without getting into this, too."

One who didn't mind being identified was Bob Williams, senior writer for the Center of Public Integrity, who said he is not surprised by IBM's allegations that its applications were held to a higher standard of evaluation than others.

The Universal Service Administrative Co. "is run by phone companies, and IBM is not a phone company," Williams said, suggesting that the SLD's motives might have been at least somewhat political in nature.

Part of the problem, Williams said, is that the SLD conducts its business without any records. "The [agency's] audits and investigations are being done without public record and scrutiny," he said.

The controversy is not good news for schools. With Congress stepping up its probe into the wasteful practices allegedly occurring within the eRate, fallout from the controversy threatens to shake the foundation of the six-year-old program. And eRate supporters say it will take a revision of the program's rules—and clear direction from the FCC as to what constitutes a competitive-bidding violation—to save the eRate from critics who are only too eager to pounce.

'Arbitrary' ruling

In an appeal filed by IBM in June on behalf of the Winston-Salem/Forsyth County School District (WSSD) in North Carolina—which had more than $17 million worth of IBM-related funding requests denied earlier this year—IBM argued that the SLD's treatment of WSSD's application was "arbitrary and capricious."