With funding for the first year of the eRate set, the Federal Communications Commission (FCC) now must turn its attention to interpreting the program’s rules. How the FCC resolves a dispute involving Tennessee’s statewide application may have far-reaching effects for both service providers and schools.

Under FCC rules, building or upgrading a state-owned wide area network (WAN) can’t be done with eRate funds. Tennessee, which owned a statewide education network called ConnecTEN, sold the network to a private company called Education Networks of America (ENA) and now pays ENA for upgraded internet access to its 1,600 schools. Tennessee is requesting $17 million in eRate discounts for this upgraded service.

Depending on whom you ask, Tennessee’s application is either “creative” or “a deceptive shell game.”

Jackie Shrago, director of ConnecTEN, said the state worked with an attorney familiar with the FCC to make sure it followed the program’s rules. There are no rules prohibiting the sale of an existing network to a private owner, Shrago said.

But ISIS 2000, the loser in a bid to provide service for the state, contends that Tennessee’s contract with the ENA violates the rules’ intention. ISIS 2000 wants the FCC to throw out the state’s application.

Rudolph Geist, an attorney for ISIS 2000, said that ENA is using a loophole in the program.

“What [Tennessee is] doing raises extremely important questions about program integrity and what is eligible for discounts,” said Geist.

Stretching the rules?

ENA won the contract, even though its bid of $74 million over three years was $23 million higher than ISIS 2000’s. The reason, according to Geist: ENA’s proposal could generate more federal money.

Through an ingenious but “suspect” proposal, Geist said, ENA offered to buy the state’s existing public education network. ConnecTEN is a two-year old project linking at least one computer in each of Tennessee’s schools to the internet.

In return, ENA would charge the state for “turnkey” internet service to all its public schools. Turnkey service means all equipment, access, security, and support–from the school to the internet and back–are supplied by the provider.

Transferring the network to ENA’s hands lets the company upgrade the network using federal eRate funds, Geist said. ENA is billing the state–and the state is billing the universal service (eRate) fund–for network upgrades under the guise of “internet access,” he said.

A question of semantics

ENA President Al Ganier painted an entirely different picture.

The state chose ENA because it offered a superior proposal, Ganier said, and ISIS 2000 is just disgruntled because it wasn’t chosen. “There is no comparison between our services, delivery, or design,” he said.

ENA’s $74 million proposal met the needs of schools much better than ISIS 2000’s plan would have, Ganier said.

Other features of ENA’s proposal that Ganier called superior are its caching, filtering, and security measures and its capacity for growth. The state’s goal is to increase the number of its school computers hooked up to the internet from 50,000 to 90,000 by supplementing existing wiring with sufficient bandwidth and equipment.

Such features constitute a service plan that should qualify for the eRate when it is offered to schools, Ganier said. Aside from being more school-friendly, ENA’s approach is no different from that of any other internet service provider, he said.

The FCC shouldn’t question Tennessee’s plan, Ganier said, given that the state agrees the solution it has purchased is cost-effective.

A review board including members of the Legislature and Tennessee Supreme Court, the state’s comptroller, and its chief financial officer unanimously upheld the state’s contract with ENA back in April.

A representative of the FCC said the agency is waiting for the Schools and Libraries Corp. (SLC) to evaluate the state’s proposal before making any decision. It’s possible the SLC will audit Tennessee’s application and set it aside for closer review, the FCC representative said.

Federal Communications Commission

ISIS 2000

Tennessee Department of Education