As the Federal Communications Commission (FCC) prepares to make key changes to the eRate--such as increasing the minimum amount the neediest applicants are required to contribute, and possibly eliminating the Form 470 used to seek competitive bids--stakeholders in the $2.25 billion-a-year federal program remain sharply divided as to what these changes should entail.

About 45 applicants, consultants, and vendors responded to the FCC's "Third Report and Order and Further Notice of Proposed Rulemaking" by the March deadline. The notice continued the agency's effort to explore ways of improving the program's application process and reducing waste, fraud, and abuse.

The eRate provides discounts of up to 90 percent on the cost of telecommunications services, internet access, and internal connections for eligible schools and libraries. Year after year, demand for the eRate has exceeded what's available.

For the 2004 funding year, the agency that oversees the program, the Schools and Libraries Division (SLD) of the Universal Service Administrative Co., reported that 39,785 applicants requested more than $4.278 billion in discounts. Although that amount is some $440 million (9 percent) less than last year, school and libraries still have asked for nearly double the amount available.

Despite the high level of participation, eRate stakeholders say the program needs a makeover because the application process is complicated and burdensome--and, increasingly, instances of program abuse have become widely publicized.

New House Energy and Commerce Committee Chairman Joe Barton, R-Texas, who says he supports the goals of the eRate, recently announced that he intends to step up focus on the eRate by reviewing the way the program is funded in conjunction with an analysis of several telecommunications issues.

Barton declined to comment on whether such a review might lead to a reduction in annual eRate funding. The eRate is also still under investigation by a House oversight and investigations subcommittee. On April 5, the Justice Department indicted five more individuals for eRate fraud, alleging they falsely claimed to have provided telecommunications services to three schools in order to receive funding.

Eliminating the Form 470

As one possible remedy, the FCC's Notice asked whether the eRate would be improved if the Form 470 process--which ensures that applicants seek competitive bids--were to be simplified or even eliminated.

Many who submitted comments applauded the idea of eliminating the form altogether and creating a system whereby applicants certify their own procurement policy and procedures.

"School districts are already bound by procurement rules designed to ensure favorable pricing, encourage competition, and prevent fraud," said the New York City Department of Education (NYCDOE). "Imposing another set of vaguely defined rules only complicates an already time-consuming process."