Hundreds of small schools in Oklahoma were denied $20 million worth of subsidies for internet service when the Federal Communications Commission (FCC) ruled that their eRate applications violated the program’s competitive bidding requirements. But that’s just the beginning.

In response to the FCC’s ruling, the Schools and Libraries Division (SLD) of the Universal Service Administrative Co., the agency that administers the eRate, pulled an additional 312 applications from its web site. The agency said these additional applications, which came from schools and libraries around the country, violated the same statute upheld by the FCC’s Oklahoma ruling.

It’s impossible to determine how much additional funding now will be lost, SLD officials explained, because what is being yanked is a first-phase form that lists only the equipment and services being advanced for discounts, not for the specific discounts themselves. Even so, spiking the application process at its inception means those hoped-for discounts will never be realized.

The FCC found that MasterMind Internet Services Inc., a Tulsa-based company that provides internet service and assistance to about 120 small schools in the state, was too involved in helping schools apply for federal subsidies for their computer systems.

Instead of listing a school employee as the contact person on their eRate applications, the schools listed a MasterMind employee.

The FCC decided this was unfair to the competitive bidding process, because MasterMind provides the internet service for the schools seeking federal aid and the schools are supposed to solicit and consider bids from other providers.

When a vendor employee is listed as the contact person, the FCC explained, a provider seeking more information about a school’s needs would actually be contacting a potential competitor.

Patrick Taylor, technology coordinator for schools in the Oklahoma communities of Grandfield, Snyder, and Davidson, said he thinks the decision is crucial to the future of Oklahoma students in rural districts.

“It will kill us if it cuts off money,” Taylor told the Daily Oklahoman. “Can you imagine cutting off the information now? We live in an information world.”

The eRate was established by the 1996 Telecommunications Act to make technology more affordable for students, particularly in rural and poorer areas. The program is paid for through fees assessed on telephone bills.

According to SLD spokesman Mel Blackwell, more than 100,000 applications have been filed in the three years since the program began—but the Oklahoma situation is the first of its kind.

“At least to our knowledge, this is the first to come to our attention,” Blackwell said. “On its face, it undermines the competitive process, which is one of the cornerstones of the program.”

The agency rejected the applications in question last year, but the FCC ruled in May on an appeal made by MasterMind.

Ron Gates, president of MasterMind, which provides technical services to many of the schools denied funding, said he thinks the FCC ignored the company’s arguments.

“We don’t think they addressed our defense accurately,” Gates said.

In rural Oklahoma, where several districts have only one school and the superintendent sometimes doubles as the school bus driver, most districts can’t afford to hire technology directors to handle applications for grants and subsidies. In addition to providing internet access, MasterMind also assists schools in applying for government funding.

“We help with the grant-writing process. In some instances, we’ll just write a grant proposal for them,” said Chris Webber, director of educational services at MasterMind, who was listed as the contact person on the applications.

The schools in question “were struggling to answer those questions, because they don’t have a technology director on-site,” he said.

After submitting a Form 470 application to the SLD, applicants must wait 28 days before choosing a vendor. During that time, an applicant’s contact person is responsible for answering questions and sending out requests for proposals (RFPs) to vendors.

“We didn’t violate any rules,” Webber said. “We handed out over 300 RFPs and answered questions about the schools when competitors called.”

MasterMind maintains there was no rule prohibiting a vendor employee from being listed as the contact person when it filed the applications.

“In an attempt to help schools, we wound up getting trapped by a policy that was not existent at the time,” Webber said.

In response to MasterMind’s arguments, the FCC said in its ruling that, although the language on the applications did not specifically say “service providers can’t sign the forms,” it did note that a competitive bidding process is required (Instructions 2-5 on Form 470).

“We do not find persuasive MasterMind’s claims that, notwithstanding its participation, the bidding processes were fair and open,” the ruling said.

Since the FCC’s ruling, the SLD has removed all Year Three Forms 470 from its web site that were signed by service provider employees. The agency said those applications, which total 312, also will be denied funding.

The effect for the Oklahoma schools is severe.

“They’ll wind up not having money to pay for internet access,” Webber said. “They won’t have money to pay for a lot of the equipment that they hoped they’d get, and that’s where it will hurt them the most.—with reporting by the Associated Press.

Federal Communication Commission

MasterMind Internet Services Inc.

Schools and Libraries Division